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EX-23.1 - EXHIBIT 23.1 - Li3 Energy, Inc.v244816_ex23-1.htm
EX-23.2 - EXHIBIT 23.2 - Li3 Energy, Inc.v244816_ex23-2.htm
As filed with the Securities and Exchange Commission on January 6, 2012
Registration No. 333-175329
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

Amendment No. 3 to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

LI3 ENERGY, INC.
(Exact name of registrant as specified in its charter)

Nevada
 
1479
 
20-3061907
(State or other jurisdiction of
 
(Primary Standard Industrial
 
(I.R.S. Employer
incorporation or organization)
 
Classification Code Number)
 
Identification No.)

Av. Pardo y Aliaga 699
Oficina 802
San Isidro, Lima, Peru
(51) 1-212-1880
(Address, including zip code, and telephone number, including area code,
of registrant’s principal executive offices)

   
Copy to:
Luis Saenz
   
Chief Executive Officer
 
Adam S. Gottbetter, Esq.
Li3 Energy, Inc.
 
Gottbetter & Partners, LLP
c/o Gottbetter & Partners, LLP
 
488 Madison Avenue, 12th Floor
488 Madison Avenue, 12th Floor
 
New York, NY  10022
New York, NY  10022
 
(212) 400-6900
(212) 400-6900
   

(Name, address, including zip code, and
telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale to the public:   From time to time after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  x

 If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ¨
Accelerated filer                    ¨
Non-accelerated filer   ¨
(Do not check if a smaller reporting company)
Smaller reporting company   x

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered
 
Amount to be
Registered(1)
 
Proposed
Maximum
Offering
Price
Per Unit(2)
   
Proposed
Maximum
Aggregate
Offering Price
   
Amount of
Registration Fee(3)
 
Common stock, par value $0.001 per share
 
83,636,790 shares
 
$
0.07
   
$
5,854,575
   
$
679
 

(1)
Consists of 42,797,958 issued and outstanding shares of our common stock plus 40,838,832 shares of our common stock issuable upon the exercise of outstanding warrants.  This registration statement shall also cover any additional shares of our common stock that shall become issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that results in an increase in the number of the outstanding shares of our common stock.

(2)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based on the average of the high and low prices for the registrant’s common stock as reported by the OTC Bulletin Board on January 3, 2012.  The shares offered hereunder may be sold by the selling stockholders from time to time in the open market, through privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at negotiated prices.

(3)
Filing fee of $2,323 was previously paid.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 
 

 

The information in this prospectus is not complete and may be changed.  The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.  This prospectus is not an offer to sell these securities and the selling stockholders are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to completion, dated January 6, 2012
 
LI3 ENERGY, INC.

Prospectus

83,636,790 Shares
Common Stock

This prospectus relates to the offer and sale of up to 42,797,958 issued and outstanding shares of our common stock, par value $0.001 per share, and 40,838,832 shares of our common stock issuable upon the exercise of outstanding warrants, by the selling stockholders of Li3 Energy, Inc., a Nevada corporation, named in this prospectus.  The shares offered by this prospectus may be sold by the selling stockholders from time to time in the open market, through privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at negotiated prices.

We are registering the offer and sale of the common stock to satisfy registration rights we have granted to the selling stockholders.  The distribution of the shares by the selling stockholders is not subject to any underwriting agreement.  We will not receive any proceeds from the sale of the shares by the selling stockholders.  However, we may receive the proceeds from the exercise of the warrants held by the selling stockholders, to the extent the warrants are not exercised on a cashless basis. We will bear all expenses of registration incurred in connection with this offering, but all selling and other expenses incurred by the selling stockholders will be borne by them.

Our common stock is traded on the OTC Bulletin Board under the symbol “LIEG.OB”. On January 3, 2012, the last reported sale price for our common stock was $0.07 per share.

Investing in our common stock involves a high degree of risk. Before making any investment in our securities, you should read and carefully consider risks described in the “Risk Factors” section beginning on page 9 of this prospectus.

You should rely only on the information contained in this prospectus or any prospectus supplement or amendment thereto. We have not authorized anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities. The information in this prospectus is only accurate on the date of this prospectus, regardless of the time of any sale of securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.

This prospectus is dated ___________, 2012 .

 
 

 

TABLE OF CONTENTS

SUMMARY
 
2
THE OFFERING
 
7
NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
8
RISK FACTORS
 
9
SELLING STOCKHOLDERS
 
18
USE OF PROCEEDS
 
33
DETERMINATION OF OFFERING PRICE
 
33
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
33
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
35
DESCRIPTION OF BUSINESS
 
47
DESCRIPTION OF PROPERTIES
 
71
LEGAL PROCEEDINGS
 
71
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
 
71
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
75
EXECUTIVE COMPENSATION
 
78
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
82
PLAN OF DISTRIBUTION
 
83
DESCRIPTION OF SECURITIES
 
85
LEGAL MATTERS
 
90
EXPERTS
 
90
WHERE YOU CAN FIND MORE INFORMATION
 
90
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
 
91
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
F-1

 
 

 

SUMMARY

The following summary highlights information contained elsewhere in this prospectus.  Potential investors should read the entire prospectus carefully, including the more detailed information regarding our business provided below in the “Description of Business” section, the risks of purchasing our common stock discussed under the “Risk Factors” section, and our consolidated financial statements and the accompanying notes to the consolidated financial statements.

Unless the context indicates otherwise, all references in this registration statement to “Li3 Energy,” “the Company,” “we,” “us” and “our” refer to Li3 Energy, Inc., and its subsidiaries.

Overview

We are an emerging exploration company (as defined below), focused on the discovery and development of lithium and potassium brine and nitrate and iodine deposits in Chile, Argentina and Peru.

 
·
In May 2011, we acquired 60% ownership of six companies that collectively own the Maricunga project, which covers an area of approximately 3,553 acres (1,438 hectares), comprising six exploitation mining concessions in areas prospective for lithium (which is non-concessible) and potassium brines, and is located in the northeast section of the Salar de Maricunga in Region III of Atacama in northern Chile.  We have conducted preliminary due diligence exploration work on this property involving digging and sampling of test pits and brine analysis, as described under “Description of Business—Our Projects—Chile—Maricunga” below.

 
·
In September, 2011, POSCO Canada Ltd., a wholly owned subsidiary of POSCO (“POSCAN”) (together, the “POSCO Agreements”) purchased 38,095,300 Units of our securities for approximately $8 million, with each “Unit” consisting of one share of our common stock and a three-year warrant to purchase one share of our common stock at an exercise price of $0.40.  POSCAN will purchase an additional 47,619,000 Units at the same $0.21 price per Unit (for an aggregate additional purchase price of approximately $10 million) upon satisfaction of certain conditions.  The agreement with POSCAN includes provisions for POSCAN to purchase brine from the Maricunga property and test it at POSCAN’s test facility in Korea.  In addition, we and POSCAN will discuss and evaluate the development, financing and construction of a brine testing facility on the Maricunga property, and if such a facility is built, we would supply the test facility with brine and other materials and utilities and assist POSCAN in obtaining any rights, licenses and permits required to build and operate such facility. POSCO (with its subsidiaries) is a diversified company, with operations in energy, chemicals and materials and is one of the largest steel manufacturers in the world.  For a more complete description of these agreements, see “Description of Business—Our Projects—Chile—Maricunga—POSCO” below.

 
·
In August 2010 we acquired 100% ownership of Alfredo Holdings, Ltd. (“Alfredo”), which, through its Chilean subsidiary, Pacific Road Mining Chile S.A. (“PRMC”), had an option to purchase mining concessions on approximately 6,670 acres (2,700 hectares) of mining tenements near Pozo Almonte, Chile (the “Alfredo Property”), prospective for saleable iodine and (aided by the potassium we expect to generate from our brine properties that are prospective for lithium) nitrate products. That option has terminated as a result of our not making the required option payments. As of the date of this Prospectus, we are not in discussions with the owners of Alfredo to reacquire the option to purchase the Alfredo Property, and there can be no assurance that a new option will be executed. We are also actively exploring opportunities to acquire other iodine/sodium nitrate prospects in addition to or in lieu of the Alfredo property; however, there can be no assurance that suitable prospects will be available on terms acceptable to us or that any such acquisition will be successfully completed.  We have not undertaken any exploration and development activities on the Alfredo Property.  See “Description of Business—Our Projects—Chile—Alfredo” below.

 
·
In July 2010 we acquired 100% ownership of Noto Energy S.A., an Argentinean corporation (“Noto”), which beneficially owns a 100% interest over 2,995 acres (1,212 hectares) situated on brine salars in Argentina, known as Cauchari.  We are in the process of evaluating the Noto property, but we currently do not anticipate spending material amounts on exploration work with respect to this project over the next 12 months.  See “Description of Business—Our Projects—Argentina—Puna Lithium Corporation, Lacus Minerals S.A and Noto Energy S.A Transactions” below.

 
·
In February 2010, we acquired 100% of the assets of the Loriscota, Suches and Vizcachas projects located respectively in the Regions of Puno, Tacna and Moquegua, Peru. The assets consist of nine undeveloped mineral claims prospective for lithium and potassium covering a total area of 19,500 acres (7,890 hectares). We continue to evaluate these properties to determine if they meet our criteria, but we currently do not anticipate spending material amounts on exploration work with respect to these projects over the next 12 months.  See “Description of Business—Our Projects—Peru” below.

 
·
We have determined that other properties we had acquired in Nevada and Argentina do not meet our integration and deposit criteria, and the options for these properties have been terminated.

Each of these acquisitions is described in more detail below.

To date, we have never generated revenue from operations and currently do not expect to generate any such revenues in the near term.

The life cycle of a brine mining operation can be divided into six phases:

 
·
Mining activity begins with the “exploration phase,” in which one seeks to define the type, extent, location and value of deposits and to estimate the grade and size of the deposits;
 
·
The exploration phase is followed by the “pre-feasibility phase,” in which the economics and risks of the project are determined;
 
·
The “feasibility phase” then ensues to address the financial viability of the project (including any permitting requirements) and to determine whether or not to proceed to development – the end of the feasibility stage is marked by the conclusion of a feasibility study;
 
·
If the decision is made to move forward after the feasibility stage, then the “development phase” follows, in which the infrastructure needed to begin operations is constructed;
 
·
Upon completion of such infrastructure, a project enters the “production phase,” during which the applicable minerals are extracted, produced and sold;
 
·
Once all economically extractable minerals have been produced, a mine is closed and it enters the “reclamation phase,” in which the area is made suitable for future uses.

Li3 is currently in the exploration phase, seeking to define the type, extent, location and value of deposits.

Strategic Plan

Our strategic plan is to explore and develop our existing projects and to identify opportunities and generate new projects with near-term production potential, with the goal of becoming a company with valuable lithium and other industrial minerals properties.  Our primary objective is to become a low cost lithium producer as well as a significant producer of potassium nitrate. The key to achieving this objective is to become an integrated chemical company through the strategic acquisition and development of lithium assets as well as other assets that have by-product synergies.

 
2

 

We have acquired a 60% interest in the Maricunga project, an advanced lithium and potassium chloride project in Chile.  We continue to explore other lithium and industrial minerals prospects in the region, in order to achieve integration of operations to produce metallurgical grade lithium, commercial grade fertilizer and pharmaceutical grade iodine.

We recorded an impairment charge to Alfredo of $4,070,000 during the year ended June 30, 2011, as a result of our not making required option payments and the consequent termination of the option.

Our strategy currently principally involves the exploration of the Maricunga property and the acquisition and exploration of the Alfredo property or another iodine/nitrate property.  On the Maricunga project, we expect to spend approximately $18.2 million of exploration and development expenses in order to complete a feasibility study on Maricunga.  (A “feasibility study” means a comprehensive study of a mineral deposit in which all geological, engineering, legal, operating, economic, social, environmental and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision whether to advance the development of the deposit for mineral production.) The Company is dividing this into two phases: (i) Spending $8 million to reach a Measured and Indicated 43-101compliant resource, which is expected in the first calendar quarter of 2012; and, if phase one is successful, (ii) spending $10 million to complete a feasibility study on Maricunga.  If we are acquire the Alfredo Property, we would expect to spend approximately $6.3 million of acquisition costs (not including an additional up to $5.5 million payable to the Alfredo Sellers (as defined below) upon certain post-feasibility milestones), and we would expect to incur approximately $2.7 million of exploration expenses in order to bring the Alfredo Property to the feasibility stage.  In the event we are unable to acquire the Alfredo Property, we will focus our efforts on the exploration of the Maricunga property, and we are actively exploring opportunities to acquire other iodine/sodium nitrate prospects in addition to or in lieu of the Alfredo property, although there can be no assurance that suitable prospects will be available on terms acceptable to us or that any such acquisition will be successfully completed.

In order to finance the up to approximately $15 million of expected acquisition and exploration costs outlined above over the next twelve months, as well as to fund the approximately $2.5 million of working capital we expect to require over the next twelve months, we will need to raise a substantial amount of funds through one or more offerings of our debt, equity or convertible securities, which may include the $10 million of equity financing conditionally committed by POSCAN.  There can be no assurance that such financing will be available, or will be available on acceptable terms, for us to meet these requirements.

In order to acquire the Alfredo Property, we must successfully negotiate a new option or other acquisition agreement.   There can be no assurance that we will be successful in obtaining a new option on, or otherwise acquiring, Alfredo or in financing the cost of acquiring the Alfredo Property or the costs of exploring and developing Maricunga and Alfredo.

We believe that successful execution of this first phase of our strategic acquisition program will establish Li3 Energy as a major holder of prime lithium, iodine and nitrate acreage among junior lithium explorers.

Lithium Exploitation Permitting Uncertainty

In Chile, where our Maricunga property is located, lithium is not exploitable via regular mining concessions.  The Chilean Mining Code (“CMC”) establishes the reserve of lithium to the State of Chile and expressly provides that the exploration or exploitation of “non-concessible” substances (including lithium) can be performed only directly by the State of Chile, or its companies, or by means of administrative concessions or special operation contracts, fulfilling the requirements and conditions set forth by the President of the Republic of Chile for each case.  Currently neither we nor our subsidiaries have sufficient authority (or permits) to explore and exploit lithium in Chile.  However, the government of Chile has announced its intention to increase the exploitation of lithium in Chile, and it may seek to amend the law to allow exploitation by private enterprises.  However, there can be no assurance that the government will be successful in these efforts (due to political and other considerations).  Alternatively, the government may begin granting operating contracts to private companies such as Li3 Energy.  The failure of the government to allow private exploitation of lithium within our development horizon for Maricunga would have a material adverse effect on our prospects.

Unlike exploitation permitting, exploration permitting is not mineral-specific in Chile.  Therefore, our current exploratory activities, whether with respect to lithium or otherwise, are permitted.  We believe we may be able to mitigate somewhat the risk of any inability to obtain permissions for lithium exploitation because (a) we expect to be able to exploit other minerals on our properties and (ii) we believe the current political environment in Chile favors the removal or reduction of legal impediments to lithium exploitation.

In Argentina, there has been a recent trend, at the National and Provincial levels, of seeking to limit and/or to restrict certain mining activities within the territory of certain Provinces.  The Province of Jujuy, which is adjacent to the Province of Salta, where the Noto Properties are located, issued in March 2011 a Decree declaring lithium reserves as strategic natural resources for the Province, subjecting lithium exploration and exploitation projects to the evaluation of an Experts Committee, and the subsequent approval of different government bodies and the favorable recommendation of the Experts Committee. There can be no assurance that similar regulations won’t be issued in the Province of Salta.

In October 2010 the National Law No. 26,639, "Regime of Minimum Principles for the Preservation of Glaciers and Periglacial Environment" (the "Glaciers Law"), was promulgated.  The Glaciers Law is aimed at the protection and preservation of glaciers and the periglacial environment. The Glaciers Law regulates, limits and in certain cases bans, certain activities developed on glacial and periglacial areas. Depending on how the Glaciers Law is interpreted – and, specifically, the definition of the term “periglacial” – this regulation could have a negative effect on the potential activities to be conducted on the Noto Properties.

We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to remain in compliance. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.

Until we complete our exploration activities and a feasibility study, we cannot be sure what minerals, if any, may be economically extracted from our properties.  Accordingly, we cannot predict precisely what permits or other authorizations may be required to support our business plan.  Furthermore, since we believe any Chilean permitting process with respect to lithium is likely to be done through an auction process, any cost estimate would be inherently speculative as well as harmful to our competitive position.

Capital Needs

As described above and as further discussed below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources,  ” we expect to require an aggregate of approximately $17.5 million over the next twelve months to pay our acquisition, exploration and development costs associated with our projects as well as our currently anticipated general and administrative and other costs.  Furthermore, if we succeed in acquiring any other projects, then we would expect to incur additional financial commitments with respect to such projects.  As a result of the funds invested by investors in our April and May 2011 private placement and the funds invested by POSCAN on September 14, 2011, we estimate that we have sufficient funds to carry out our current strategic plan of exploration and development and meet our ongoing operational working capital needs through March 2012 (assuming we do not expend cash for other acquisitions).  We plan to seek to raise additional capital through additional sales of our equity or debt securities.  There can be no assurance, however, that such financing will be available to us or, if it is available, that it will be available on terms acceptable to us and that it will be sufficient to fund our expected needs.  If we are unable to obtain sufficient financing, we may not be able to continue with our exploration and development plans, make additional acquisitions or meet our ongoing operational working capital needs.

Weaknesses in Internal Controls

Our management assessed the effectiveness of our internal control over financial reporting and disclosure controls and procedures as at June 30, 2011, and concluded that our internal control over financial reporting and disclosure controls and procedures were ineffective.  Management concluded that the following were material weaknesses in our internal controls over financial reporting: (a) we did not maintain proper segregation of duties for the preparation of our financial statements, and (b) we have not established an Audit Committee of our Board independent of management.  Although we intend to remediate such material weaknesses, we have not yet been able to address these material weaknesses and they may continue to remain unremedied for some time, which could adversely impact the accuracy and timeliness of future reports and filings we make to the SEC and compliance with any future listing standards and could have a material adverse effect on our business, results of operations, financial condition and liquidity.

Going Concern

We currently have no sources of recurring revenue, had working capital of $20,926 at March 31, 2011, and have generated net losses of $37,386,124 and negative cash flows from operations of $4,809,444 during the period from June 24, 2005 (inception) through March 31, 2011.

 
3

 

In the course of our exploration and development activities, we have sustained and continue to sustain losses. We do not anticipate positive cash flow from operations before 2013 and cannot predict if and when we may generate profits. In the event that we identify commercial reserves of minerals, we will require substantial additional capital to develop those reserves. We expect to finance our operations primarily through future issuances of securities. However, there exists substantial doubt about our ability to continue as a going concern because there is no assurance that we will be able to obtain such capital, through equity or debt financing, or any combination thereof, on satisfactory terms or at all. Additionally, no assurance can be given that any such financing, if obtained, will be adequate to meet our ultimate capital needs and to support our growth. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, then our operations would be materially negatively impacted.

Our ability to complete additional equity or debt offerings is dependent on the state of the debt and/or equity markets at the time of any proposed offering, and such market’s reception of us and the offering terms. In addition, our ability to complete an offering may be dependent on the status of our exploration activities, which cannot be predicted. There is no assurance that capital in any form would be available to us, and if available, on terms and conditions that are acceptable.

These conditions raise substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations and to obtain additional financing as may be required until such time as we can generate sources of recurring revenues and to ultimately attain profitability.  Our consolidated financial statements included in this prospectus have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which implies we will continue to meet our obligations and continue our operations for the next twelve months. Realization values may be substantially different from carrying values as shown, and our consolidated financial statements do not include any adjustments relating to the recoverability or classification of recorded asset amounts or the amount and classification of liabilities that might be necessary in the event we are unable to continue as a going concern. Additionally, our independent registered public accounting firm included an explanatory paragraph in their report on our consolidated financial statements for the year ended June 30, 2010, included in this prospectus, that raises substantial doubt about our ability to continue as a going concern.

About This Offering

This prospectus relates to the public offering, which is not being underwritten, of up to 42,797,958 outstanding shares of our common stock plus 40,838,832 shares of our common stock issuable upon the exercise of our outstanding warrants (described under Selling Stockholders below) by the selling stockholders listed in this prospectus.  This prospectus shall also cover any additional shares of our common stock that shall become issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that results in an increase in the number of the outstanding shares of our common stock.

The shares offered by this prospectus may be sold by the selling stockholders from time to time in the open market, through negotiated transactions or otherwise at market prices prevailing at the time of sale or at negotiated prices.  We will receive none of the proceeds from the sale of the shares by the selling stockholders.  However, we may receive the proceeds from the exercise of the warrants held by the selling stockholders, to the extent the warrants are not exercised on a cashless basis. We will bear all expenses of registration incurred in connection with this offering, but all selling and other expenses incurred by the selling stockholders will be borne by them.

The number of shares being offered by this prospectus (including the shares issuable upon exercise of our outstanding warrants) represents approximately 26.0% of our outstanding shares of common stock as of January 5, 2012.

Corporate Information and History

We were incorporated on June 24, 2005, in Nevada as Mystica Candle Corp.  We were originally in the business of manufacturing, marketing and distributing soy-blend scented candles and oils, but we could not continue with those business operations because of a lack of financial results and resources.  We have redirected our focus, therefore, towards identifying and pursuing options regarding the development of a new business plan and direction.

 
4

 

In 2008 we engaged in discussions with NanoDynamics, Inc., a Delaware corporation (“NanoDynamics”), regarding a possible business combination with NanoDynamics, and with the permission of NanoDynamics, we changed our name to NanoDynamics Holdings, Inc. to facilitate these discussions.  We determined not to proceed with that business combination, however.

On October 19, 2009, we changed our name to Li3 Energy, Inc., to reflect our plans to focus our business strategy on the energy sector and related lithium mining opportunities in North and South America.

On February 23, 2010, we acquired 100% of the assets of the Loriscota, Suches and Vizcachas Projects located respectively in the Regions of Puno, Tacna and Moquegua, Peru.  These projects consist solely of mineral claims and have, and have had, no operations or revenues.

Prior to this acquisition, we were a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).  As a result of the acquisition, we ceased to be a shell company.  Since exiting “shell company” status, we have acquired certain additional assets and entered into certain agreements, as described in this prospectus.

Our principal executive offices are located at Av. Pardo y Aliaga 699, Oficina 802, San Isidro, Lima, Peru, and our telephone number at our principal executive offices is (51) 1-212-1880. Our website address is www.li3energy.com; however, the material included in our website does not constitute a part of this prospectus and should not be relied on by prospective purchasers in the offering. Our fiscal year end is June 30.

All common stock share and per share numbers herein give retroactive effect to our 3.031578-for-1 forward stock split in the form of a dividend which was effected on July 29, 2008, and our 15.625-for-1 forward stock split in the form of a dividend which was effected on November 16, 2009, unless otherwise stated.

 
5

 

Summary Financial Information

The following tables summarize historical financial data regarding our business and should be read together with the information in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included in this prospectus.

   
Fiscal Year Ended
June 30,
   
Three Months Ended
 September 30,
   
June 24,
2005
(inception)
Through
September 30,
2011
 
   
2011
   
2010
   
2011
   
2010
   
(unaudited)
 
               
(unaudited)
   
(unaudited)
       
Statement of Operations Data
                             
                               
Revenues
 
$
-
   
$
-
   
$
-
   
$
-
   
$
2,278
 
Gross profit
   
-
     
-
     
-
     
-
     
1,096
 
Total operating expenses
   
11,626,242
     
9,816,666
     
1,718,438
     
1,103,869
     
23,351,326
 
Change in fair value of derivative liability – warrant instruments
   
6,116,147
     
6,223,547
     
(6,948,644
)
   
(2,772,726
)
   
5,391,050
 
Net income (loss)
   
(19,219,382
)
   
(16,048,682)
     
3,839,980
     
1,663,543
     
(31,621,794
)
                                         
Statement of Cash Flows Data
                                       
                                         
Cash used in operating activities
 
$
(3,594,823
)
 
$
(2,377,417)
   
$
(1,052,692
)
 
$
(606,968
)
 
$
(7,198,229
)
Cash used in investing activities
   
(6,550,000
)
   
(1,418,785)
     
(56,845
)
   
(180,000
)
   
(8,045,130
)
Cash provided by financing activities
   
10,794,403
     
4,089,320
     
7,484,069
     
487,998
     
22,475,292
 
 
   
At June 30,
   
At September 30,
 
   
2011
   
2010
   
2011
 
               
(unaudited)
 
Balance Sheet Data
                 
                   
Total current assets
 
$
1,097,460
   
$
359,297
   
$
7,458,126
 
Total assets
   
65,138,460
     
703,243
     
71,554,684
 
Total current liabilities
   
1,271,770
     
1,745,321
     
2,747,825
 
Total liabilities
   
16,516,524
     
9,775,049
     
14,261,948
 
Total shareholders’ equity (deficit)
   
48,621,936
     
(9,071,806
)
   
57,292,736
 

 
6

 

THE OFFERING

Common stock currently outstanding
 
322,209,220 shares (1)
     
Common stock offered by the Company
 
None
     
Common stock offered by the selling stockholders
 
83,636,790 shares (2)
     
Use of proceeds
 
We will not receive any of the proceeds from the sales of our common stock by the selling stockholders. However, we may receive the proceeds from the exercise of the warrants held by the selling stockholders, to the extent the warrants are not exercised on a cashless basis.
     
OTCBB symbol
 
LIEG
     
Risk Factors
 
You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 9 of this prospectus before deciding whether or not to invest in shares of our common stock.

(1)
As of January 5, 2012.  Does not include 2,000,000 shares of restricted stock which remain subject to certain vesting milestones.

(2)
Consists of 42,797,958 issued and outstanding shares of common stock and 40,838,832 shares of common stock issuable upon the exercise of outstanding warrants (described under Selling Stockholders below).

 
7

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Various statements in this prospectus, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects, revenues, income and capital spending. We generally identify forward-looking statements with the words “believe,” “intend,” “expect,” “seek,” “may,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project” or their negatives, and other similar expressions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates, financial results and project developments and acquisitions or to our expectations regarding future industry or economic trends are forward-looking statements.

These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expect. The forward-looking statements contained in this prospectus are largely based on our expectations, which reflect many estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our actual results. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this prospectus are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed in the “Risk Factors” section and elsewhere in this prospectus. All forward-looking statements are based upon information available to us on the date of this prospectus. We undertake no obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, except as otherwise required by law. These cautionary statements qualify all forward-looking statements attributable to us, or persons acting on our behalf.

 
8

 

RISK FACTORS

An investment in shares of our common stock is highly speculative and involves a high degree of risk.  We face a variety of risks that may affect our operations or financial results and many of those risks are driven by factors that we cannot control or predict.  Before investing in our common stock you should carefully consider the following risks, together with the financial and other information contained in this prospectus.  If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be materially adversely affected.  In that case, the trading price of our common stock would likely decline and you may lose all or a part of your investment.  Only those investors who can bear the risk of loss of their entire investment should participate in this offering.

RISKS RELATED TO OUR BUSINESS AND FINANCIAL CONDITION

We are an exploration stage company and have no revenues. Our business plan depends on our ability to explore for and develop mineral reserves and place any such reserves into extraction. Because we have a limited operating history, it is difficult to predict our future performance.

Although we were formed in June 2005, we have been and continue to be an exploration stage company. Therefore, we have limited operating and financial history available to help potential investors evaluate our past performance and the risks of investing in us. Moreover, our limited historical financial results may not accurately predict our future performance. Companies in their initial stages of development present substantial business and financial risks and may suffer significant losses. As a result of the risks specific to our new business and those associated with new companies in general, it is possible that we may not be successful in implementing our business strategy.

We have generated no revenues to date and do not anticipate generating any revenues in the near term. Our activities to date have been limited to capital formation, organization, acquisition of interests in mining properties and limited exploration on our projects, including digging and sampling of test pits and brine analysis on our Maricunga property. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. Our success is significantly dependent on a successful exploration, mining and production program. Our operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to locate exploitable quantities of mineral resources or operate on a profitable basis. We are in the exploration stage and potential investors should be aware of the difficulties normally encountered by enterprises in the exploration stage. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our Company.

Our past losses raise doubt about our ability to continue as a going concern.

The Consolidated Financial Statements contained herein have been prepared assuming we will continue as a going concern. We currently have no sources of recurring revenue, and have generated net losses of $31,621,794 and negative cash flows from operations of $7,198,229 during the period from June 24, 2005 (inception) through September 30, 2011. We cannot predict if and when we may generate profits.  As a result of the funds invested by investors in our April and May 2011 private placement and the funds invested by POSCAN on September 14, 2011, we estimate that we have sufficient funds to carry out our current strategic plan of exploration and development and meet our ongoing operational working capital needs through March 2012 (assuming we do not expend cash for other acquisitions).  After that, we expect to finance our operations primarily through future sales of our equity or debt securities. However, as discussed in the notes to our Consolidated Financial Statements included in this prospectus, there exists substantial doubt about our ability to continue as a going concern because there is no assurance that we will be able to obtain such capital, through equity or debt financing, or any combination thereof, on satisfactory terms or at all.  The Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.

Our option on the Alfredo Property has expired, and  we are not currently negotiating to acquire a new option.

Under the option for the Alfredo Property, our subsidiary PRMC was required to make periodic payments aggregating $360,000 between June 30, 2010 and December 30, 2010. We paid $80,000 in August 2010 and were required to make payments of $100,000 by October 30, 2010, and $180,000 by December 30, 2010, in order to maintain our option rights. Then, in order to exercise the option and purchase the Alfredo Property, we would have been required to pay the option exercise price of $4,860,000 by March 30, 2011. We did not make the $100,000 payment on October 30, 2010, the $180,000 payment on December 30, 2010 or the option exercise price payment of $4,860,000 on March 30, 2011. Under the terms of the option agreement, the option terminated as a result of our not making the required option payments within the specified default and cure periods, and we therefore recorded impairment expense for the Alfredo property of $4,070,000 during the year ended June 30, 2011. Although we have had some discussions with the owners of the Alfredo Property to reacquire the option to purchase the Alfredo Property on modified terms, as of the date of this prospectus we are not actively negotiating a new option, and there can be no assurance that any new option will be executed. We are actively exploring opportunities to acquire other iodine/sodium nitrate prospects in addition to or in lieu of the Alfredo property; however, there can be no assurance that suitable prospects will be available on terms acceptable to us or that any such acquisition will be successfully completed.

 
9

 

We have not made certain scheduled payments under agreements with respect to certain properties we were considering acquiring.  If we are deemed to be liable for such payments (and/or damages arising out of their non-payment), then our business, financial condition and prospects could be materially adversely affected.

Pursuant to our Option Agreements with GeoXplor Corp. on the Nevada Claims, we were required to make periodic and milestone payments and also to maintain the relevant mineral claims in good standing for certain time periods.  We failed to make a periodic payment of $100,000 due on June 30, 2010.  During the year ended June 30, 2011, we became obligated to pay approximately $57,000 of claim maintenance fees on the Nevada Claims and approximately $32,600 of Nevada state taxes, which we have not paid.

If and to the extent we are found liable for, or deliver value in settlement of, any claims that may arise from the foregoing, and/or our expenses related to those matters become significant, then our business, financial condition and prospects could be materially adversely affected and the value of our stockholders' interests in us could be impaired.

All of our properties are in the exploration stage. Investment in exploration projects increases the risks inherent in our mining activities. There is no assurance that we can establish the existence of any mineral resource on any of our properties in commercially exploitable quantities, and our mining operations may not be successful.

We have not established that any of our mineral properties contains any meaningful levels of mineral reserves. There can be no assurance that future exploration and mining activities will be successful.

A mineral reserve is defined by the SEC in its Industry Guide 7 (which can be viewed at http://www.sec.gov/divisions/corpfin/forms/industry.htm#secguide7 ) as that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. There can be no assurance that we will ever establish any mineral reserves.

Even if we do eventually discover a meaningful mineral reserve on one or more of our properties, there can be no assurance that we will be able to develop our properties into producing mines and extract those resources. Both mineral exploration and development involve a high degree of risk and few properties which are explored are ultimately developed into producing mines. Furthermore, we cannot be sure that an overall exploration success rate or extraction operations within a particular area will ever come to fruition and, in any event, production rates inevitably decline over time. The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral deposit, the proximity of the resource to infrastructure such as a smelter, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.

We have limited financial resources and may not be able to fund our anticipated exploration activities. If we are unable to fund our exploration activities, our potential profitability will be adversely affected.

Our anticipated exploration activities will require financial resources substantially in excess of our current working capital. If we are not able to finance our exploration activities, then we will be unable to identify commercially exploitable resources even if present on our properties. If we fail to adequately support our exploration activities, it could have a material adverse effect on our results of operations and the market price of our shares. There can be no assurance that capital will be available to us when needed, on favorable terms or at all.

 
10

 

Mineral operations are subject to applicable law and government regulation. Even if we discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource.

Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs.

In Chile, lithium is not exploitable via regular mining concessions. The Chilean Mining Code (“CMC”) establishes the reserve of lithium to the State of Chile and expressly provides that the exploration or exploitation of “non-concessible” substances (including lithium) can be performed only directly by the State of Chile, or its companies, or by means of administrative concessions or special operation contracts, fulfilling the requirements and conditions set forth by the President of the Republic of Chile for each case.  Currently neither the Company nor its subsidiaries have sufficient authority (or permits) to explore and exploit lithium in Chile.  However, the government of Chile has announced its intention to increase the exploitation of lithium in Chile, and it may seek to amend the law to allow exploitation by private enterprises.  However, the approval of a two-thirds majority of the Chilean Congress will be required to amend the existing law, and there can be no assurance that the government will be successful in these efforts (due to political and other considerations).  Alternatively, the government may begin granting operating contracts to private companies such as Li3 Energy.  The failure of the government to allow private exploitation of lithium within our development horizon for Maricunga would have a material adverse effect on our prospects.  Unlike exploitation permitting, exploration permitting is not mineral specific in Chile.  Accordingly, there can be no assurance that we will be able to obtain the permits necessary to exploit any minerals that our exploration activities discover.

There has been a recent trend in Argentina, at the National and Provincial levels, of seeking to limit and/or to restrict certain mining activities within the territory of certain Provinces.

The Province of Jujuy, which is adjacent to the Province of Salta, where the Noto Properties are located, issued in March 2011 a Decree declaring lithium reserves as strategic natural resources for the Province, subjecting lithium exploration and exploitation projects to the evaluation of an Experts Committee, and the subsequent approval of different government bodies and the favorable recommendation of the Experts Committee. There can be no assurance that similar regulations won’t be issued in the Province of Salta.

In October 2010 the National Law No. 26,639, "Regime of Minimum Principles for the Preservation of Glaciers and Periglacial Environment" (the "Glaciers Law"), was promulgated.  The Glaciers Law is aimed at the protection and preservation of glaciers and the periglacial environment. The Glaciers Law regulates, limits and in certain cases bans, certain activities developed on glacial and periglacial areas. Depending on how the Glaciers Law is interpreted – and, specifically, the definition of the term “periglacial” – this regulation could have a negative effect on the potential activities to be conducted on the Noto Properties.

We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to remain in compliance. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.

Argentinean foreign exchange regulations may make it difficult to transfer funds in and out of Argentina, which could adversely affect our liquidity and operations.

Argentinean foreign exchange regulations impose numerous restrictions to the transfer of funds in and out of the territory of Argentina. Additional restrictions on the ability to access the Argentinean foreign exchange market and transfer foreign currency in and out of Argentina could adversely affect our liquidity and operations in Argentina and, to the extent we generate funds from activities in Argentina, our ability to access such funds.

If we establish the existence of a mineral resource on any of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into a producing mine. If we are unable to obtain additional funding, our business operations will be harmed and if we do obtain additional financing, existing shareholders may suffer substantial dilution.

If we do discover mineral resources in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to establish the extent of the resource, develop processes to extract it and develop extraction and processing facilities and infrastructure. Although we may derive substantial benefits from the discovery of a major deposit, there can be no assurance that such a resource will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis.

We have raised some capital to date, including through the sale of equity securities and convertible notes, but we currently do not have any contracts or firm commitments for additional financing. There can be no assurance that additional financing will be available in amounts or on terms acceptable to us, if at all. An inability to obtain additional capital would restrict our ability to grow and could diminish our ability to continue to conduct our business operations. If we are unable to obtain additional financing, we will likely be required to curtail exploration and development plans and possibly cease operations. Any additional equity financing may involve substantial dilution to then existing shareholders.

Newer battery and/or fuel cell technologies could decrease demand for lithium over time.

Many materials and technologies are being researched and developed with the goal of making batteries lighter, more efficient, faster charging and less expensive. Some of these technologies could be successful and could impact demand for lithium batteries in personal electronics, electric and hybrid vehicles and other applications. Advances in nanotechnology, in particular, offer the prospect of significantly better batteries in the future. For example, researchers at Stanford University have recently demonstrated ultra-lightweight, bendable batteries and supercapacitors made from paper coated with ink made of carbon nanotubes and silver nanowires; the material charges and discharges very quickly, making it potentially useful in hybrid and electric vehicles, which need rapid power for acceleration and would benefit from quicker charging than is available with current technologies. We cannot predict which new technologies may ultimately prove to be commercializable and on what time horizon. While lithium battery technology is currently among the best available for electronics, vehicles and other applications, commercialized battery technologies that offer superior weight, capacity, charging time and/or cost could significantly adversely affect the demand for lithium in the future and thus could significantly adversely impact our prospects and future revenues.

 
11

 

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

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

Lithium, iodine and nitrates prices are subject to unpredictable fluctuations.

We may derive revenues, if any, either from the extraction and sale of lithium, iodine and potassium nitrate, as well as other potentially economic salts produced from the lithium salar brines, or from the sale of our mineral resource properties. The price of these commodities may fluctuate widely, and is affected by numerous factors beyond our control, including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities, increased production due to new extraction developments and improved extraction and production methods and technological changes in the markets for the end products. The effect of these factors on the price of these minerals, and therefore the economic viability of any of our exploration properties and projects, cannot accurately be predicted.

The mining industry is highly competitive, and we face competition from many established domestic and foreign companies.  We may not be able to compete effectively with these companies.

The markets in which we operate are highly competitive.  The mineral exploration, development, and production industry is largely un-integrated.  We compete against numerous well-established national and foreign companies in every aspect of the mineral mining industry.  Some of our competitors have longer operating histories and greater technical facilities, and significantly greater recognition in the market and financial and other resources, than we.  We may not compete effectively with other exploration companies in locating and acquiring mineral resource properties, and customers may not buy any or all of the mineral products that we expect to produce.

Because we are small and do not have much capital, we may have to limit our exploration and developmental mining activity which may result in a loss of your investment.

Because we are a small exploration stage company and do not have much capital, we must limit our exploration and production activity.  As such, we may not be able to complete an exploration program that is as thorough as we would like.  In that event, existing reserves may go undiscovered.  Without finding reserves, we cannot generate revenues and you may lose any investment you make in our shares.

Compliance with environmental and other government regulations could be costly and could negatively impact production.

Our operations are subject to numerous federal, state and local laws and regulations governing the operation and maintenance of our facilities and the discharge of materials into the environment or otherwise relating to environmental protection.  These laws and regulations may:

 
require that we acquire permits before commencing extraction operations;

 
restrict the substances that can be released into the environment in connection with mining and extraction activities;

 
limit or prohibit mining activities on protected areas such as wetland or wilderness areas; and

 
require remedial measures to mitigate pollution from former operations, such as dismantling abandoned production facilities.
 
 
12

 

Under these laws and regulations, we could be liable for personal injury and clean-up costs and other environmental and property damages, as well as administrative, civil and criminal penalties.  We do not believe that insurance coverage for environmental damages that occur over time is available at a reasonable cost, and we do not maintain any such insurance.  Also, we do not believe that insurance coverage for the full potential liability that could be caused by sudden and accidental environmental damages is available at a reasonable cost.  Accordingly, we may be subject to liability or we may be required to cease production (subsequent to any commencement) from properties in the event of environmental damages.

We may be unable to amend the mining claims that we are seeking to acquire to cover the primary minerals that we plan to develop.

Our business plan includes acquisition, exploration and development of lithium brine properties.  However, we may pursue this goal by acquiring salt-mining claims and/or options or other interests in salt-mining claims or other types of claims, which we intend to seek to have amended to cover lithium extraction.  There can be no assurance that we will be successful in amending any such claims timely, economically or at all.  See Risk Factors – “Mineral operations are subject to applicable law and government regulation. . .,” above.

We may have difficulty managing growth in our business.

Because of the relatively small size of our business, growth in accordance with our long-term business plans, if achieved, will place a significant strain on our financial, technical, operational and management resources.  As we increase our activities and the number of projects we are evaluating or in which we participate, there will be additional demands on our financial, technical, operational and management resources.  The failure to continue to upgrade our technical, administrative, operating and financial control systems or the occurrence of unexpected expansion difficulties, including the recruitment and retention of required personnel could have a material adverse effect on our business, financial condition and results of operations and our ability to timely execute our business plan.

If we are unable to keep our key management personnel, then we are likely to face significant delays at a critical time in our corporate development and our business is likely to be damaged.

Our success depends upon the skills, experience and efforts of our management and other key personnel, including our Chief Executive Officer.  As a relatively new company, much of our corporate, scientific and technical knowledge is concentrated in the hands of a few individuals.  We do not have employment agreements with any of our employees other than our Chief Executive Officer and our Chief Operating Officer.  We do not maintain key-man life insurance on any of our management or other key personnel.  The loss of the services of one or more of our present management or other key personnel could significantly delay our exploration and development activities as there could be a learning curve of several months or more for any replacement personnel.  Furthermore, competition for the type of highly skilled individuals we require is intense and we may not be able to attract and retain new employees of the caliber needed to achieve our objectives.  Failure to replace key personnel could have a material adverse effect on our business, financial condition and operations.

Our Interim Chief Financial Officer has other substantial business activities that limit the amount of time that he can devote to managing our business.

Our Interim Chief Financial Officer, Eric E. Marin, currently serves as the Interim Chief Financial Officer of another publicly traded company, and has other business interests.  Accordingly, Mr. Marin is only able to devote a portion of his time to our activities.  This may make it more difficult for our management to respond quickly and completely to challenges and opportunities that we may encounter, may limit our ability to timely consummate strategic transactions and may have an adverse effect on our results of operations.

 
13

 

Difficult conditions in the global capital markets may significantly affect our ability to raise additional capital to continue operations.

The ongoing worldwide financial and credit upheaval may continue indefinitely.  Because of reduced market liquidity, we may not be able to raise additional capital when we need it.  Because the future of our business will depend on our ability to explore and develop the mineral resources on our existing properties and to complete the acquisition of one or more additional mineral resource properties for which, most likely, we will need additional capital, we may not be able to complete such development and acquisition projects or develop or acquire revenue producing assets.  As a result, we may not be able to generate income and, to conserve capital, we may be forced to curtail our current business activities or cease operations entirely.

Being a public company has increased our expenses and administrative workload.

As a public company, we must comply with various laws and regulations, including the Sarbanes-Oxley Act of 2002 and related rules of the SEC.  Complying with these laws and regulations requires the time and attention of our board of directors and management, and increases our expenses.  Among other things, we must:

 
maintain and evaluate a system of internal control over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;

 
maintain policies relating to disclosure controls and procedures;

 
prepare and distribute periodic reports in compliance with our obligations under federal securities laws;

 
institute a more comprehensive compliance function, including with respect to corporate governance; and

 
involve to a greater degree our outside legal counsel and accountants in the above activities.

In addition, being a public company has made it more expensive for us to obtain director and officer liability insurance.  In the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain this coverage.  These factors could also make it more difficult for us to attract and retain qualified executives and members of our board of directors, particularly directors willing to serve on an audit committee which we expect to establish.

RISKS RELATED TO OUR COMMON STOCK

There is not now, and there may not ever be, an active market for our common stock.

There currently is a limited public market for our common stock.  Further, although our common stock is currently quoted on the OTC Bulletin Board (the “OTCBB”), trading of our common stock may be extremely sporadic.  For example, several days may pass before any shares may be traded.  As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of, our common stock.  Accordingly, investors must assume they may have to bear the economic risk of an investment in our common stock for an indefinite period of time.  There can be no assurance that a more active market for our common stock will develop, or if one should develop, there is no assurance that it will be sustained.  This severely limits the liquidity of our common stock, and would likely have a material adverse effect on the market price of our common stock and on our ability to raise additional capital.

We cannot assure you that our common stock will become liquid or that it will be listed on a securities exchange.

Until our common stock is listed on a national securities exchange such as the New York Stock Exchange or the Nasdaq National Market, we expect our common stock to remain eligible for quotation on the OTCBB, or on another over-the-counter quotation system.  In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of our common stock.  In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors.  Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock.  This would also make it more difficult for us to raise capital.

 
14

 

Our common stock is subject to the “penny stock” rules of the SEC and FINRA’s sales practice requirements, and the trading market in our common stock is limited, which makes transactions in our common stock cumbersome and may reduce the value of an investment in the stock.

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, the rules require:

 
that a broker or dealer approve a person’s account for transactions in penny stocks; and

 
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

 
obtain financial information and investment experience objectives of the person; and

 
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:

 
the basis on which the broker or dealer made the suitability determination; and

 
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of common stock and cause a decline in the market value of stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.  Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

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

The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.

The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:

 
15

 

 
actual or anticipated variations in our operating results;

 
announcements of developments by us, our strategic partners or our competitors;

 
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

 
adoption of new accounting standards affecting our industry;

 
additions or departures of key personnel;

 
sales of our common stock or other securities in the open market; and

 
other events or factors, many of which are beyond our control.

The stock market is subject to significant price and volume fluctuations.  In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against such company.  Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.

Compliance with U.S. securities laws, including the Sarbanes-Oxley Act, will be costly and time-consuming.

We are a reporting company under U.S. securities laws and are obliged to comply with the provisions of applicable U.S. laws and regulations, including the Securities Act of 1933 (the “Securities Act”), the Exchange Act, and the Sarbanes-Oxley Act of 2002 and the related rules of the SEC, and the rules and regulations of the relevant U.S. market, in each case, as amended from time to time.  Preparing and filing annual and quarterly reports and other information with the SEC, furnishing audited reports to stockholders and other compliance with these rules and regulations will involve a material increase in regulatory, legal and accounting expenses and the attention of management, and there can be no assurance that we will be able to comply with the applicable regulations in a timely manner, if at all.

We do not anticipate dividends to be paid on our common stock, and investors may lose the entire amount of their investment.

Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future.  We expect to use future earnings, if any, to fund business growth.  Therefore, stockholders will not receive any funds absent a sale of their shares.  We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

If securities analysts do not initiate coverage or continue to cover our common stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our common stock.

The trading market for our common stock may be affected by, among other things, the research and reports that securities analysts publish about our business and the Company.  We do not have any control over these analysts.  There is no guarantee that securities analysts will cover our common stock.  If securities analysts do not cover our common stock, the lack of research coverage may adversely affect its market price.  If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline.  If one or more of these analysts ceases to cover us or fails to publish regular reports on us, then we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

 
16

 

State Blue Sky registration – potential limitations on resale of the shares.

The holders of the shares of our common stock and persons who desire to purchase the shares in any trading market that might develop in the future, should be aware that there may be significant state law restrictions upon the ability of investors to resell the securities.  Accordingly, investors should consider the secondary market for our securities to be a limited one.  It is the intention of our management to seek coverage and publication of information regarding us in an accepted publication which permits a “manuals exemption.”  This manuals exemption permits a security to be sold by shareholders in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by that state.  The listing entry must contain (i) the names of issuers, officers, and directors, (ii) an issuer’s balance sheet, and (iii) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations.  The principal accepted manuals are those published by Standard and Poor’s, and Mergent, Inc.  Many states expressly recognize these manuals.  A smaller number of states declare that they recognize securities manuals, but do not specify the recognized manuals.  Among others, the following states do not have any provisions and, therefore, do not expressly recognize the manuals exemption:  Alabama, California, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont, and Wisconsin.

You may experience dilution of your ownership interests because of the future issuance of additional shares of our common stock.

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders and the purchasers of our common stock offered hereby.  We are currently authorized to issue an aggregate of 1,000,000,000 shares of capital stock consisting of 990,000,000 shares of common stock and 10,000,000 shares of preferred stock with preferences and rights to be determined by our Board of Directors.  As of January 5, 2012, there are 322,209,220 shares of our common stock and no shares of our preferred stock outstanding.  There are 4,500,000 shares of our common stock reserved for issuance under our 2009 Equity Incentive Plan (the “2009 Plan”), of which we have 1,266,667 nonqualified stock options, 700,000 restricted stock units and 2,000,000 shares of restricted stock outstanding.  In addition, there are 89,284,714 shares of our common stock issuable upon the exercise of outstanding warrants and another approximately 14,358,500 shares issuable upon conversion of outstanding convertible promissory notes.

Any future issuance of our equity or equity-backed securities may dilute then-current stockholders’ ownership percentages and could also result in a decrease in the fair market value of our equity securities, because our assets would be owned by a larger pool of outstanding equity.  As described above, we may need to raise additional capital through public or private offerings of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.  We may also issue such securities in connection with hiring or retaining employees and consultants (including stock options issued under our equity incentive plans), as payment to providers of goods and services, in connection with future acquisitions or for other business purposes.  Our Board of Directors may at any time authorize the issuance of additional common or preferred stock without common stockholder approval, subject only to the total number of authorized common and preferred shares set forth in our certificate of incorporation.  The terms of equity securities issued by us in future transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect.  Also, the future issuance of any such additional shares of common or preferred stock or other securities may create downward pressure on the trading price of the common stock.  There can be no assurance that any such future issuances will not be at a price (or exercise prices) below the price at which shares of the common stock are then traded.

 We may obtain additional capital through the issuance of preferred stock, which may limit your rights as a holder of our common stock.

Without any stockholder vote or action, our Board of Directors may designate and approve for issuance shares of our preferred stock.  The terms of any preferred stock may include priority claims to assets and dividends and special voting rights which could limit the rights of the holders of our common stock.  The designation and issuance of preferred stock favorable to current management or stockholders could make any possible takeover of us or the removal of our management more difficult.

We have identified material weaknesses related to our internal control over financial reporting and concluded that our internal control over financial reporting and disclosure controls and procedures were ineffective as of June 30, 2011. These material weaknesses remain unremedied, which could continue to impact our ability to report results of operations and financial condition accurately and in a timely manner.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to include in our annual reports on Form 10-K an assessment by management of the effectiveness of our internal control over financial reporting.  We have identified material weaknesses in our internal control over financial reporting.  Our management assessed the effectiveness of our internal control over financial reporting and disclosure controls and procedures as at June 30, 2011, and concluded that our internal control over financial reporting and disclosure controls and procedures were ineffective.  Management concluded that the following were material weaknesses in our internal controls over financial reporting: (a) we did not maintain proper segregation of duties for the preparation of our financial statements, and (b) we have not established an Audit Committee of our Board independent of management.  See Item 9A, “Controls and Procedures,” in our Annual Report on Form 10-K for the year ended June 30, 2011.  Although we intend to remediate such material weaknesses, we have not yet been able to address these material weaknesses and they may continue to remain unremedied for some time, which could adversely impact the accuracy and timeliness of future reports and filings we make to the SEC and compliance with any future listing standards and could have a material adverse effect on our business, results of operations, financial condition and liquidity.

 
17

 

We must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404.  Our compliance with Section 404 will require that we incur accounting expense and expend management efforts.  We currently do not have an internal audit group, and we will need to retain the services of additional accounting and financial staff or consultants with appropriate public company experience and technical accounting knowledge to satisfy the ongoing requirements of Section 404.

OTHER RISKS

We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise.  Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.

SELLING STOCKHOLDERS

This prospectus covers the resale from time to time by the selling stockholders identified in the table below of up to 42,797,958 issued and outstanding shares of our common stock and 40,838,832 shares of our common stock issuable upon the exercise of outstanding warrants comprising:

 
-
22,432,701 shares sold by us in our private placement offering that concluded on May 19, 2011 (the “G Unit PPO”);
 
-
11,216,365 shares issuable upon exercise of warrants sold by us in our G Unit PPO;
 
-
4,806,878 shares issuable upon exercise of warrants sold by us in our private placement offering that concluded on February 23, 2011 (the “E Unit PPO”);
 
-
2,950,000 shares sold by us in the E Unit PPO;
 
-
6,900,003 shares issued upon exercise of Warrants sold by us in the E Unit PPO;
 
-
200,000 shares issuable upon exercise of warrants sold by us in our private placement offering that closed in November 2010 (the “D Unit PPO”);
 
-
3,757,627 shares issued upon exercise of warrants sold by us in the D Unit PPO;
 
-
4,000,000 shares issued pursuant to certain rights (the “Double Options”) granted to investors in the D Unit PPO;
 
-
1,200,000 shares issuable upon exercise of outstanding warrants that we issued pursuant to the Double Options;
 
-
2,757,627 shares issued upon exercise of warrants that we issued pursuant to the Double Option;
 
-
9,575,516 shares issuable upon exercise of warrants sold by us in our private placement offering that concluded on September 13, 2010 (the “First 2010 PPO”); and
 
-
13,840,000 shares issuable upon exercise of warrants sold by us in our private placement offering that closed in November and December of 2009 (the “2009 PPO”).

During the last three years, we have issued unregistered securities to various persons. None of these transactions involved any underwriters, underwriting discounts or commissions, or any public offering. The sales of these securities were deemed to be exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof, Regulation S promulgated thereunder and/or Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the certificates issued in such transactions. All purchasers of our securities were accredited or sophisticated persons, or were non-U.S. persons, and had adequate access, through employment, business or other relationships, to information about us.

We agreed to file a registration statement with the SEC to register under the Securities Act the shares of our common stock and the shares of common stock underlying the warrants sold by us in our G Unit PPO.  We agreed to file the registration statement by June 21, 2011, and to use our best efforts to cause such registration statement to become effective within 150 days after the filing date, all at the Company’s expense.  If we do not meet these deadlines, we agreed to pay the investors liquidated damages of 2% of their investment per month until such failures are cured (up to an aggregate maximum penalty of 10%).  We had also granted to investors in certain prior private placements “piggy-back” registration rights with respect to the shares of our common stock and shares of common stock underlying warrants purchased by them, as well as the shares of our common stock and shares of common stock underlying warrants contained in the units that were issued upon exercise of the “Double Option” as described under “Description of Securities—Other Rights to Purchase Our Securities” below. Pursuant to those agreements with the selling stockholders, we filed with the SEC on July 1, 2011, a registration statement on Form S-1, of which this prospectus forms a part, under the Securities Act to register the shares of common stock covered by this prospectus.  To date, we have not paid any liquidated damages for not filing a registration statement for the securities issued in the 2011 private placement by the June 21, 2011 deadline.  Although we have not received any demand for such payment and may ultimately seek a waiver of the liquidated damages provision, we have accrued an aggregate liability of $43,056 for the ten days that we were late in filing the registration statement of which this prospectus forms a part ($38,750 of such amount was recorded as an accrued liability at June 30, 2011).

In the several closings of the 2009 PPO, held in November and December 2009, we sold an aggregate of 14,000,000 units at a price of $0.25 per unit, for an aggregate gross offering price of $3,500,000.  Each of such units consisted of:  (i) one share of our common stock; (ii) a warrant (“A Warrant”) to purchase one-half share of our common stock, exercisable for a period of five years at an initial exercise price of $0.50 per whole share; and (iii) a warrant (“B Warrant”) to purchase one-half share of our common stock, exercisable for a period of five years at an initial exercise price of $1.00 per whole share.  The exercise prices of the warrants issued to investors in the 2009 PPO are subject to anti-dilution adjustments, and have been adjusted from time to time, however, the number of shares issuable upon exercise of such warrants has not been adjusted.  At January 5, 2012, the exercise price per share of the A Warrants and B Warrants are approximately $0.31 and $0.48, respectively.  We are registering for resale under this prospectus 13,840,000 of the 14,000,000 shares issuable upon the exercise of warrants contained in the units sold in the 2009 PPO, pursuant to piggyback registration rights granted to the investors in the 2009 PPO. We are not registering for resale under this prospectus any of the shares sold in the 2009 PPO.

In the several closings of the First 2010 PPO, held in June, July and September 2010, we sold an aggregate of 6,160,000 units at a price of $0.25 per unit, for an aggregate gross offering price of $1,540,000.  Each of such units consisted of:  (i) one share of our common stock; and (ii) a warrant (“C Warrant”) to purchase one share of our common stock, exercisable for a period of five years at an initial exercise price of $0.50 per share.  The exercise price of the C Warrants and the number of shares issuable upon exercise thereof are subject to anti-dilution adjustments, and have been adjusted from time to time.  At January 5, 2012, the exercise price per share of the C Warrants is approximately $0.32.  We are registering for resale under this prospectus all of the 9,575,516 shares issuable upon exercise of C Warrants contained in the units sold in the First 2010 PPO, together with any additional shares that may become issuable upon such exercise pursuant to the antidilution provisions thereof, pursuant to piggyback registration rights granted to the investors in the First 2010 PPO. We are not registering for resale under this prospectus any of the shares sold in the First 2010 PPO.

In the D Unit PPO, we sold an aggregate of 4,000,000 units at a price of $0.05 per unit, for an aggregate gross offering price of $200,000.  Each of such units consisted of:  (i) one share of our common stock; and (ii) a warrant (“D Warrant”) to purchase one share of our common stock, exercisable for a period of five years at an initial exercise price of $0.05 per share (subject to antidilution adjustments).  Investors in the D Unit PPO each received the right (the “Double Option”) to purchase additional units, up the number of units purchased in the D Unit PPO, exercisable until November 8, 2011.  The Double Options have all been exercised, and we have issued an additional 4,000,000 units for gross proceeds of $200,000 pursuant thereto.  We are registering for resale under this prospectus the 200,000 shares issuable upon exercise of outstanding D Warrants contained in the units sold in the D Unit PPO, 3,757,627 shares issued upon exercise of D Warrants sold by us in the D Unit PPO, 1,200,000 shares issuable upon exercise of D Warrants that have been issued pursuant to the exercise of Double Options, 2,757,627 shares of common stock that have been issued upon exercise of D Warrants issued pursuant to the exercise of Double Options and 4,000,000 shares of common stock issued upon the exercise of Double Options, all pursuant to piggyback registration rights granted to the investors in the D Unit PPO. We are not registering for resale under this prospectus any of the shares initially sold in the D Unit PPO.

In the several closings of the E Unit PPO, held in December 2010 and January and February 2011, we sold an aggregate of 11,666,663 units at a price of $0.15 per unit, for an aggregate gross offering price of approximately $1,750,000.  Each of such units consisted of:  (i) one share of our common stock; and (ii) a warrant (“E Warrant”) to purchase one share of our common stock, exercisable for a period of five years at an initial exercise price of $0.15 per share.  The exercise price of the warrants issued to investors in the E Unit PPO are subject to anti-dilution adjustments, and has been adjusted from time to time.  At January 5, 2012, the exercise price per share of the E Warrants is approximately $0.15.  We are registering for resale under this prospectus all of the 4,806,878 shares issuable upon exercise of E Warrants that remain outstanding, 2,950,000 of the 11,666,663 shares sold by us in the E Unit PPO and 6,900,003 of the 7,423,336 shares issued upon exercise of E Warrants, pursuant to piggyback registration rights granted to the investors in the E Unit PPO.
   
In the several closings of the G Unit PPO, held in April and May 2011, we sold an aggregate of 23,920,071 units at a price of $0.27 per unit, for an aggregate gross offering price of approximately $6,458,419.  Each of such units consisted of:  (i) one share of our common stock; and (ii) a warrant (“G Warrant”) to purchase one-half share of our common stock, exercisable for a period of three years at an initial exercise price of $0.40 per share.  The exercise price of the G Warrants issued to investors in the G Unit PPO is subject to anti-dilution adjustments, and has been adjusted from time to time.  At January 5, 2012, the exercise price per share of the G Warrants is approximately $0.37.  We are registering for resale under this prospectus 11,216,365 of the 11,960,050 shares issuable upon exercise of G Warrants, pursuant to registration rights granted to the investors in the G Unit PPO. We are also registering for resale under this prospectus 22,432,701 of the 23,920,071 shares sold in the G Unit PPO.

The selling stockholders identified in the table below may from time to time offer and sell under this prospectus any or all of the shares of common stock described under the column “Shares of Common Stock Being Offered” in the table below.

We effected two separate stock splits in the form of dividends with respect to our common stock. The first was a 3.031578-for-1 forward split for which the record and effective dates were July 21, 2008, and July 29, 2008, respectively. The second was a 15.625-for-1 forward split for which the record and effective dates were November 6, 2009 and November 16, 2009, respectively. All share and per share amounts in this prospectus have been adjusted to give retroactive effect to such stock splits, unless otherwise stated.

Certain selling stockholders may be deemed to be “underwriters” as defined in the Securities Act. Any profits realized by such selling stockholder may be deemed to be underwriting commissions.
 
 
18

 

The table below has been prepared based upon the information furnished to us by the selling stockholders as of the date of this prospectus.  The selling stockholders identified below may have sold, transferred or otherwise disposed of some or all of their shares since the date on which the information in the following table is presented in transactions exempt from or not subject to the registration requirements of the Securities Act. Information concerning the selling stockholders may change from time to time and, if necessary, we will amend or supplement this prospectus accordingly.  We cannot give an estimate as to the number of shares of common stock that will actually be held by the selling stockholders upon termination of this offering because the selling stockholders may offer some or all of their common stock under the offering contemplated by this prospectus or acquire additional shares of common stock.  The total number of shares that may be sold hereunder will not exceed the number of shares offered hereby.  Please read the section entitled “Plan of Distribution” in this prospectus.

The following table sets forth the name of each selling stockholder, the number of shares of our common stock beneficially owned by such stockholder before this offering, the number of shares to be offered for such stockholder’s account and the number and (if one percent or more) the percentage of the class to be beneficially owned by such stockholder after completion of the offering. The number of shares owned are those beneficially owned, as determined under the rules of the Securities and Exchange Commission, and such information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares of our common stock as to which a person has sole or shared voting power or investment power and any shares of common stock which the person has the right to acquire within 60 days after the date of this prospectus through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement, and such shares are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the person holding such options, warrants or other rights, but are not deemed outstanding for computing the percentage of any other person. Beneficial ownership percentages are calculated based on 322,209,220 shares of our common stock outstanding as of January 5, 2012.

Unless otherwise set forth below, based upon the information furnished to us, (a) the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the selling stockholder’s name, subject to community property laws, where applicable, (b) no selling stockholder had any position, office or other material relationship within the past three years, with us or with any of our predecessors or affiliates, and (c) no selling stockholder is a broker-dealer. Selling stockholders who are affiliates of a broker-dealer are indicated by footnote.  We have been advised that these affiliates of broker-dealers purchased our common stock and warrants in the ordinary course of business, not for resale, and at the time of purchase, did not have any agreements or understandings, directly or indirectly, with any person to distribute the related common stock.
 
Selling Stockholder
 
Shares of
Common
Stock
Beneficially
Owned
Before the
Offering
   
Shares of
Common
Stock Being
Offered (A)
   
Shares of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (B)
   
Percentage
of Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (1)
 
Socorro Albán (2)
   
85,282
     
33,334
     
51,948
     
*
 
Albatroz Capital Inc. (3)
   
555,555
     
555,555
     
0
     
*
 
Jaime Alvarez G. (4)
   
426,400
     
166,666
     
259,734
     
*
 
Amancay International LLC (5)
   
1,111,112
     
1,111,112
     
0
     
*
 
Robert Anderson (6)
   
600,000
     
300,000
     
300,000
     
*
 
Silio David Aparicio (7)
   
138,890
     
138,890
     
0
     
*
 
Miguel Aramburu (8)
   
648,783
     
568,783
     
80,000
     
*
 
Arcade Investments Limited (9)
   
60,000
     
60,000
     
0
     
*
 
Juan Bernardo Ugueto Arismendi (10)
   
555,555
     
555,555
     
0
     
*
 
Aton Balanced Fund Limited (11)
   
5,902,146
     
3,235,480
     
2,666,666
     
*
 
Aton Ventures Fund Limited (12)
   
2,054,243
     
1,554,243
     
500,000
     
*
 
Lon E. Bell (13)
   
555,555
     
555,555
     
0
     
*
 
Alegria Benarroch (14)
   
555,555
     
555,555
     
0
     
*
 
Marco Antonio Gamero Benavente (15)
   
138,890
     
138,890
     
0
     
*
 
Alan F. Bilzi (16)
   
150,000
     
150,000
     
0
     
*
 
BonAnno Family Partnership LLP (17)
   
1,900,000
     
1,100,000
     
800,000
     
*
 
Bradley Resources LLC (18)
   
277,778
     
277,778
     
0
     
*
 
Jamie Perez Branger (19)
   
1,876,174
     
733,336
     
1,142,838
     
*
 
Elliot Braun (20)
   
200,000
     
100,000
     
100,000
     
*
 
Bretton James, Inc. (21)
   
600,000
     
600,000
     
0
     
*
 
Robert Burkhardt (22)
   
60,000
     
60,000
     
0
     
*
 
 
 
19

 

Selling Stockholder
 
Shares of
Common
Stock
Beneficially
Owned
Before the
Offering
   
Shares of
Common
Stock Being
Offered (A)
   
Shares of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (B)
   
Percentage
of Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (1)
 
Maria Cecilia Cambana (23)
   
322,221
     
322,221
     
0
     
*
 
Carlos Canete (24)
   
277,778
     
277,778
     
0
     
*
 
Otilia Caserta (25)
   
333,333
     
333,333
     
0
     
*
 
Celta Consultores Limitada (26)
   
833,334
     
833,334
     
0
     
*
 
Centrum Bank (27)
   
3,942,040
     
833,334
     
3,108,706
     
*
 
Chestnut Ridge Partners, LP (28)
   
800,000
     
800,000
     
0
     
*
 
Martin Cieslak (29)
   
60,000
     
60,000
     
0
     
*
 
CoJack Investment Opportunities LLC (30)
   
995,254
     
965,254
     
30,000
     
*
 
Lee Corbin (31)
   
120,000
     
120,000
     
0
     
*
 
Cranshire Capital LP (32)
   
833,333
     
833,333
     
0
     
*
 
Cynergy Emerging Growth LLC Fund § (33)
   
138,893
     
138,893
     
0
     
*
 
Miguel de la Campa (34)
   
1,388,889
     
1,388,889
     
0
     
*
 
Carmen Bentin D.C. de Leguia (35)
   
277,778
     
277,778
     
0
     
*
 
Esther de Marmol (36)
   
85,277
     
33,332
     
51,945
     
*
 
Helena Delano (37)
   
341,123
     
133,334
     
207,789
     
*
 
Nick DeMare (38)
   
240,000
     
120,000
     
120,000
     
*
 
Ian Duany (39)
   
194,456
     
194,456
     
0
     
*
 
Jose Duarte (40)
   
666,666
     
666,666
     
0
     
*
 
Adrien Ellul (41)
   
1,164,948
     
672,495
     
492,453
     
*
 
Martin Ferraro (42)
   
138,890
     
138,890
     
0
     
*
 
First Sun Investment Corp. (43)
   
277,778
     
277,778
     
0
     
*
 
Kay Fischer (44)
   
205,500
     
205,500
     
0
     
*
 
 
 
20

 

Selling Stockholder
 
Shares of
Common
Stock
Beneficially
Owned
Before the
Offering
   
Shares of
Common
Stock Being
Offered (A)
   
Shares of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (B)
   
Percentage
of Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (1)
 
Glynn Fisher § (45)
   
80,000
     
40,000
     
40,000
     
*
 
Freestone Advantage Partners, LP (46)
   
138,888
     
138,888
     
0
     
*
 
Carlos Frei (47)
   
652,704
     
277,778
     
374,926
     
*
 
Alvaro Hernandez Fry (48)
   
166,667
     
166,667
     
0
     
*
 
Jose Roberto Vazquez Garcia (49)
   
170,559
     
66,666
     
103,893
     
*
 
James Gavilan (50)
   
55,556
     
55,556
     
0
     
*
 
Grafton Resource Investments, Ltd. (51)
   
12,000,000
     
6,000,000
     
6,000,000
     
1.65
%
Daniela Granier (52)
   
42,638
     
16,666
     
25,972
     
*
 
Maria Eugenia Grisolia (53)
   
341,123
     
133,334
     
207,789
     
*
 
Hampton Corporation (54)
   
5,613,889
     
4,064,829
     
1,549,060
     
*
 
Ray & Ann Hautamaki (55)
   
150,000
     
150,000
     
0
     
*
 
Robert Havlik (56)
   
83,334
     
83,334
     
0
     
*
 
Hibernia Ltd. (57)
   
2,250,000
     
2,250,000
     
0
     
*
 
Taylor Housser § (58)
   
80,000
     
40,000
     
40,000
     
*
 
ID Introduction Ltd. (59)
   
1,705,607
     
666,667
     
1,038,940
     
*
 
John P. Funkey Revocable Trust (60)
   
93,750
     
93,750
     
0
     
*
 
John Paul De Joria Family Trust (61)
   
4,000,000
     
2,000,000
     
2,000,000
     
*
 
Kherson Investments Ltd. (62)
   
1,192,676
     
799,607
     
393,069
     
*
 
Maria Marta Leonardini (63)
   
1,004,371
     
1,004,371
     
0
     
*
 
Jose Roberto de Romana Letts (64)
   
2,222,222
     
2,222,222
     
0
     
*
 
Bruce Levenbrook (65)
   
95,000
     
95,000
     
0
     
*
 
Jim Lucey (66)
   
75,000
     
75,000
     
0
     
*
 
 
 
21

 

Selling Stockholder
 
Shares of
Common
Stock
Beneficially
Owned
Before the
Offering
   
Shares of
Common
Stock Being
Offered (A)
   
Shares of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (B)
   
Percentage
of Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (1)
 
LW Emerging Markets Opportunities Master Fund, Ltd. (67)
   
18,134,703
     
5,775,153
     
12,539,550
     
3.33
%
LW Securities S.A. (68)
   
4,414,358
     
1,172,223
     
3,242,135
     
*
 
Valentina Marmol (69)
   
170,562
     
66,667
     
103,895
     
*
 
Tom McGurk (70)
   
60,000
     
60,000
     
0
     
*
 
Harvey McKenzie (71)
   
111,111
     
111,111
     
0
     
*
 
Andrew Meade (72)
   
4,000,000
     
3,000,000
     
1,000,000
     
*
 
Enrique Blondet Montero (73)
   
195,000
     
195,000
     
0
     
*
 
Robert L. Montgomery (74)
   
150,000
     
150,000
     
0
     
*
 
Musgrave Investments Limited (75)
   
1,125,000
     
1,125,000
     
0
     
*
 
Richard Neustadter (76)
   
800,000
     
800,000
     
0
     
*
 
Jose Banus Nogue (77)
   
2,000,001
     
2,000,001
     
0
     
*
 
Uxua Ojer (78)
   
170,562
     
66,667
     
103,895
     
*
 
Orca Trading GmbH (79)
   
400,000
     
200,000
     
200,000
     
*
 
Alexander Pena (80)
   
1,500,000
     
1,500,000
     
0
     
*
 
Don Petkau (81)
   
440,000
     
220,000
     
220,000
     
*
 
Phoenix Advisory Services Ltd. (82)
   
852,805
     
666,668
     
186,137
     
*
 
Pico Alto Investments S.A. (83)
   
277,778
     
277,778
     
0
     
*
 
Plango Investments SA (84)
   
895,441
     
699,998
     
195,443
     
*
 
Ponte Group Ltd. (85)
   
2,558,410
     
2,000,000
     
558,410
     
*
 
Walter Pramer, Jr. (86)
   
55,556
     
55,556
     
0
     
*
 
Walter Pramer, Sr. (87)
   
255,556
     
155,556
     
100,000
     
*
 
Radical Capital Ltd. (88)
   
652,500
     
652,500
     
0
     
*
 
Oscar Caipo Ricci (89)
   
450,000
     
450,000
     
0
     
*
 
 
 
22

 

Selling Stockholder
 
Shares of
Common
Stock
Beneficially
Owned
Before the
Offering
   
Shares of
Common
Stock Being
Offered (A)
   
Shares of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (B)
   
Percentage
of Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (1)
 
Robyn Schreiber Irrevocable Trust (90)
   
150,000
     
150,000
     
0
     
*
 
Carlos Javier Alvarez Roca (91)
   
555,556
     
555,556
     
0
     
*
 
Ignacio Rosado (92)
   
680,001
     
425,214
     
254,787
     
*
 
Edward Rosenthal (93)
   
600,000
     
600,000
     
0
     
*
 
Luis Omar Salinas (94)
   
85,282
     
33,334
     
51,948
     
*
 
Martin Segal (95)
   
57,000
     
57,000
     
0
     
*
 
Paul Sharp (96)
   
111,111
     
111,111
     
0
     
*
 
Christian Sieling (97)
   
1,004,371
     
504,371
     
500,000
     
*
 
Lauerano Sigmund (98)
   
277,778
     
277,778
     
0
     
*
 
Nadine Smith (99)
   
1,388,889
     
1,388,889
     
0
     
*
 
Clara Maria Sola (100)
   
1,339,148
     
672,488
     
666,660
     
*
 
Sterling Finance & Trust (101)
   
1,044,052
     
744,052
     
300,000
     
*
 
William N. Strawbridge (102)
   
83,334
     
83,334
     
0
     
*
 
Edward A. Sugar § (103)
   
600,000
     
600,000
     
0
     
*
 
Frank Taggart (104)
   
640,000
     
320,000
     
320,000
     
*
 
The Carnahan Trust (105)
   
555,555
     
555,555
     
0
     
*
 
Kjeld Thygesen (106)
   
400,000
     
200,000
     
200,000
     
*
 
Ralph Winter Tinman (107)
   
138,890
     
138,890
     
0
     
*
 
Mark Tompkins (108)
   
9,339,162
     
6,672,495
     
2,666,667
     
*
 
 
 
23

 

Selling Stockholder
 
Shares of
Common
Stock
Beneficially
Owned
Before the
Offering
   
Shares of
Common
Stock Being
Offered (A)
   
Shares of
Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (B)
   
Percentage
of Common
Stock
Beneficially
Owned Upon
Completion
of the
Offering (1)
 
Paul Tompkins (109)
   
2,000,000
     
1,500,000
     
500,000
     
*
 
Ana Leticia Ulivi (110)
   
277,778
     
277,778
     
0
     
*
 
Jose Antonio Velit Desmaison (111)
   
138,900
     
138,900
     
0
     
*
 
Joaquin Vera (112)
   
138,890
     
138,890
     
0
     
*
 
John Wagner (113)
   
75,000
     
75,000
     
0
     
*
 
Wealth Concepts LLC (114)
   
600,000
     
600,000
     
0
     
*
 
Steven M.Weisman (115)
   
75,000
     
75,000
     
0
     
*
 
White Rock Capital Partners, L.P. (116)
   
400,000
     
400,000
     
0
     
*
 
Craig Whited (117)
   
2,000,000
     
1,600,000
     
400,000
     
*
 
Paul Yurfest (118)
   
300,000
     
300,000
     
0
     
*
 
Lorena Zalles (119)
   
55,556
     
55,556
     
0
     
*
 
Nicolas Zalles (120)
   
55,556
     
55,556
     
0
     
*
 
Roberto Zalles (121)
   
255,841
     
200,000
     
55,841
     
*
 
David M. Zlotchew (122)
   
112,500
     
112,500
     
0
     
*
 
Totals
   
129,507,886
     
83,636,790
     
45,871,096
         
 
 
24

 

* Less than 1%

§ Affiliated with a Broker-Dealer

(A)
An aggregate of 40,838,832 of the shares of common stock being offered by the selling stockholders are issuable upon exercise of outstanding warrants.

(B)
Assumes all of the shares of common stock to be registered on the registration statement of which this prospectus is a part, including all shares of common stock underlying options or warrants held by the selling stockholders, are sold in the offering and that shares of common stock beneficially owned by such selling stockholder but not being registered by this prospectus are not sold.

(1)
Percentages are based on the 322,209,220 shares of common stock issued and outstanding as of January 5, 2012 (not including 2,000,000 shares of Restricted Stock issued but subject to vesting conditions). Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of January 5, 2012 are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person; provided, however, that the 40,838,832 shares that may be sold in the Offering which are issuable upon exercise of warrants described above are deemed outstanding upon completion of the Offering.

(2)
Includes 18,614 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(3)
Jureck Claux has the power to vote and dispose of the shares being registered on behalf of Albatroz Capital Inc.  Includes 185,185 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(4)
Includes 93,068 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(5)
Antonio Cussen has the power to vote and dispose of the shares being registered on behalf of Amancay International LLC. Includes 370,371 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(6)
Includes 300,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(7)
Includes 46,297 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(8)
Includes 272,487 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(9)
E. Isaac Collie has the power to vote and dispose of the shares being registered on behalf of Arcade Investments Ltd. Includes 20,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(10)
Includes 185,185 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(11)
David Dawes has the power to vote and dispose of the shares being registered on behalf of Aton Balanced Fund Limited.  Includes 3,235,480 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.
 
 
25

 

(12)
David Dawes has the power to vote and dispose of the shares being registered on behalf of Aton Ventures Fund Limited. Includes 1,554,243 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(13)
Includes 185,185 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(14)
Includes 185,185 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(15)
Includes 46,297 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(16)
Includes 50,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(17)
Raymond J. BonAnno has the power to vote and dispose of the shares being registered on behalf of BonAnno Family Partnership LLP. Includes 900,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(18)
George Holbrook has the power to vote and dispose of the shares being registered on behalf of Bradley Resources LLC. Includes 92,593 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(19)
Includes 409,502 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(20)
Includes 100,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(21)
Adam S. Gottbetter has the power to vote and dispose of the shares being registered on behalf of Bretton James, Inc. Includes 400,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(22)
Includes 20,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.
 
(23)
Includes 107,407 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(24)
Includes 92,593 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(25)
Includes 111,111 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(26)
Jaime Bravo has the power to vote and dispose of the shares being registered on behalf of Celta Consultores Limitada. Includes 277,778 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(27)
Juerg Muehlethaler and Alessandra Waibel have the power to vote and dispose of the shares being registered on behalf of Centrum Bank. Includes 277,778 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 
26

 
 
(28)
Kenneth Pasternak has the power to vote and dispose of the shares being registered on behalf of  Chestnut Ridge Partners, LP.  Includes 800,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(29)
Includes 20,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(30)
Raymond Dean Hautamaki has the power to vote and dispose of the shares being registered on behalf of CoJack Investment Opportunities LLC. Includes 50,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(31)
Includes 40,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(32)
Downsview  Capital, Inc. (“Downsview”), as the general partner of Cranshire Capital, L.P., and Mitchell P. Kopin, as Downview’s President, have the power to vote and dispose of the shares being registered on behalf of Cranshire Capital LP.  Includes 277,778 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(33)
Patrick S. Adams has the power to vote and dispose of the shares being registered on behalf of Cynergy Emerging Growth LLC Fund. Includes 46,298 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(34)
Includes 462,963 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(35)
Includes 92,953 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(36)
Includes 18,613 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(37)
Includes 74,445 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(38)
Includes 120,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(39)
Includes 64,819 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(40)
Includes 222,222 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(41)
Includes 672,495 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(42)
Includes 46,297 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(43)
Jose Alva Fouscas has the power to vote and dispose of the shares being registered on behalf of First Sun Investment Corp. Includes 92,593 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(44)
Includes 68,500 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 
27

 

(45)
Includes 40,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(46)
Downsview  Capital, Inc. (“Downsview”), as the investment manager for a managed account of Freestone Advantage Partners, LP, and Mitchell P. Kopin, as Downview’s President, have the power to vote and dispose of the shares being registered on behalf of Freestone Advantage Partners, LP.  Includes 46,296 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(47)
Includes 92,593 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(48)
Includes 55,556 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(49)
Includes 37,227 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(50)
Includes 18,519 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(51)
David Hutchins is the nominee for Grafton Resource Investments Ltd., the beneficial owner of the shares.  David James has the power to vote and dispose of the shares being registered hereunder. Includes 6,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(52)
Includes 9,306 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(56)
Includes 74,455 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(54)
Carlos A. Zalles has the power to vote and dispose of the shares being registered on behalf of Hampton Corporation.  Includes 3,093,108 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days and 1,458,333 shares of common stock issuable upon conversion of zero-coupon convertible notes currently convertible or convertible within 60 days.

(55)
Includes 50,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(56)
Includes 27,778 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(57)
Patrick Cussen has the power to vote and dispose of the shares being registered on behalf of Hibernia Limited.  Includes 750,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(58)
Includes 40,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(59)
Jose Francisco Arata has the power to vote and dispose of the shares being registered on behalf of ID Introduction Ltd.  Includes 372,273 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(60)
John P. Funkey has the power to vote and dispose of the shares being registered on behalf of John P. Funkey Revocable Trust.  Includes 31,250 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(61)
John Paul DeJoria has the power to vote and dispose of the shares being registered on behalf of  John Paul DeJoria Family Trust.  Includes 2,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(62)
Jose Rafael Odreman has the power to vote and dispose of the shares being registered on behalf of Kherson Investments Ltd.  Includes 559,342 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 
28

 

(63)
Includes 504,371 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(64)
Includes 740,741 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(65)
Includes 31,667 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.
 
(66)
Includes 25,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(67)
Carlos A. Zalles has the power to vote and dispose of the shares being registered on behalf of LW Emerging Markets Opportunities Master Fund, Ltd. Includes 5,039,169 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days. Includes 750,000 shares of common stock issuable upon exercise of warrants and 6,250,000 shares of common stock issuable upon conversion of zero-coupon convertible notes held by LW Natural Resources Opportunities Fund, Ltd., which warrants and convertible notes are currently exercisable or convertible. LW Emerging Markets Opportunities Master Fund Ltd. is under common control with LW Natural Resources Opportunities Fund, Ltd. and may be deemed to beneficially own securities held by it.

(68)
Carlos A. Zalles has the power to vote and dispose of the shares being registered on behalf of LW Securities S.A.  Includes 1,223,875 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(69)
Includes 37,228 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(70)
Includes 20,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(71)
Includes 37,037 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(72)
Includes 1,000,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(73)
Includes 65,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(74)
Includes 50,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(75)
Sacha Grut has the power to vote and dispose of the shares being registered on behalf of Musgrave Investments Limited.  Includes 375,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(76)
Includes 800,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(77)
Includes 666,667 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(78)
Includes 37,228 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(79)
Jan Schimmer and Wolfgang Birshhardt have the power to vote and dispose of the shares being registered on behalf of Orca Trading GmbH.  Includes 200,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(80)
Includes 500,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 
29

 

(81)
Includes 220,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(82)
Enrique Collado has the power to vote and dispose of the shares being registered on behalf of Phoenix Advisory Services Ltd.  Includes 186,137 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(83)
Mario Persivale has the power to vote and dispose of the shares being registered on behalf of Pico Alto Investments S.A.  Includes 92,593 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(84)
Benjamin Gomez has the power to vote and dispose of the shares being registered on behalf of  Plango Investments SA.  Includes 195,443 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(85)
Juan Carlos Maldonado has the power to vote and dispose of the shares being registered on behalf of  Ponte Group Ltd.  Includes 558,410 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(86)
Includes 18,519 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(87)
Includes 118,519 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(88)
Marcus New has the power to vote and dispose of the shares being registered on behalf of Radical Capital Ltd. Includes 217,500 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(89)
Includes 150,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.
 
(90)
Warren Schreiber has the power to vote and dispose of the shares being registered on behalf of Robyn Schreiber Irrevocable Trust. Includes 50,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(91)
Includes 185,186 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(92)
Includes 258,547 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(93)
Includes 200,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.
 
(94)
Includes 18,614 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(95)
Includes 19,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.
 
 
30

 

(96)
Includes 37,037 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(97)
Includes 504,371 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(98)
Includes 92,593 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(99)
Includes 462,963 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(100)
Includes 672,488 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.
 
(101)
Alejandro Graver has the power to vote and dispose of the shares being registered on behalf of Sterling Finance & Trust.  Includes 558,866 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(102)
Includes 27,778 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(103)
Includes 200,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(104)
Includes 320,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(105)
Kevin Carnahan and Laurie Carnahan have the power to vote and dispose of the shares being registered on behalf of  The Carnahan Trust.  Includes 185,185 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(106)
Includes 200,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(107)
Includes 46,297 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(108)
Includes 672,495 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(109)
Includes no shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(110)
Includes 92,593 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(111)
Includes 46,300 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(112)
Includes 46,297 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(113)
Includes 25,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 
31

 

(114)
Steven, H. Detsch has the power to vote and dispose of the shares being registered on behalf of Wealth Concepts LLC.  Includes 200,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(115)
Includes 25,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(116)
Thomas U. Barton or Joseph U. Barton have the power to vote and dispose of the shares being registered on behalf of White Rock Capital Partners, L.P. Includes 400,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(117)
Includes 800,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(118)
Includes 100,000 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(119)
Includes 18,519 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(120)
Includes 18,519 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(121)
Includes 55,841 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

(122)
Includes 37,500 shares of common stock issuable upon exercise of warrants currently exercisable or exercisable within 60 days.

 
32

 

USE OF PROCEEDS

We will not receive proceeds from the sale of common stock under this prospectus. We could, however, receive proceeds from the selling stockholders if and when they exercise warrants the common stock underlying which is covered by this prospectus. We would use any proceeds received for working capital and general corporate purposes.  The warrant holders may exercise their warrants at any time until their expiration, by cash payment of the exercise price or, for certain warrants and under certain circumstances, by “cashless exercise,” as further described below under “Description of Securities.”  If the warrants are exercised in full, the estimated proceeds from such exercise would be up to $13,480,667 if all of the warrants are exercised through the payment of cash to the Company.  Because the warrant holders may exercise the warrants in their own discretion, if at all, we cannot plan on specific uses of proceeds beyond application of proceeds to general corporate purposes.  We have agreed to bear the expenses (other than any underwriting discounts or commissions or agent’s commissions) in connection with the registration of the common stock being offered hereby by the selling stockholders, but all selling and other expenses incurred by the selling stockholders will be borne by them.

DETERMINATION OF OFFERING PRICE

There currently is a limited public market for our common stock.  The selling stockholders will determine at what price they may sell the offered shares, and such sales may be made at prevailing market prices or at privately negotiated prices. See “Plan of Distribution” below for more information.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information and Holders

As of January 5, 2012, there were 322,209,220 shares of our common stock issued and outstanding, 89,284,714 shares issuable upon exercise of outstanding warrants, approximately 14,358,500 shares issuable upon conversion of outstanding convertible notes, 2,000,000 unvested shares of restricted stock, 700,000 restricted stock units, and 1,266,667 shares issuable upon exercise of outstanding options.  On December 30, 2011, there were approximately 196 holders of record of shares of our common stock.

Since July 1, 2006, our common stock has been listed for quotation on the Over-the-Counter Bulletin Board, originally under the symbol “MYTC.”  Our symbol changed to “NNDY” in July 2008 in connection with our name change to NanoDynamics Holdings, Inc.  Our symbol changed to “LIEG” effective November 18, 2009, in connection with our name change to Li3 Energy, Inc.

The following table sets forth the high and low closing bid prices for our common stock for the fiscal quarters indicated as reported on the OTCBB.  The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Our Common Stock is thinly traded and, thus, pricing of our common stock on the OTCBB does not necessarily represent its fair market value.

 
33

 

Period
 
High(1)
   
Low(1)
 
             
Fiscal Year Ending June 30, 2010
               
First Quarter
 
$
0.0600
   
$
0.0600
 
Second Quarter
   
0.8800
     
0.0500
 
Third Quarter
   
1.0800
     
0.6700
 
Fourth Quarter
   
0.9150
     
0.3500
 
                 
Fiscal Year Ending June 30, 2011
               
First Quarter
 
$
0.4200
   
$
0.1850
 
Second Quarter
   
0.3200
     
0.1010
 
Third Quarter
   
0.5100
     
0.2150
 
Fourth Quarter
   
0.4500
     
0.1950
 
                 
Fiscal Year Ending June 30, 2012
               
First Quarter
 
$
0.2100
   
$
0.1010
 
Second Quarter
   
0.1170
     
0.0575
 

(1)
All quotations give retroactive effect to our 3.031578-for-1 forward stock split in the form of a dividend which was effected on July 29, 2008, and our 15.625-for-1 forward stock split in the form of a dividend which was effected on November 16, 2009.

Dividends

We have never declared any cash dividends with respect to our common stock.  Future payment of dividends is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, financial condition and other relevant factors.  Our credit agreement signed in May 2011 prohibits the payment of dividends through the February 2, 2012, maturity date.  Although there are no other material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock, we presently intend to retain future earnings, if any, for use in our business and have no present intention to pay cash dividends on our common stock.

Securities Authorized for Issuance under Equity Compensation Plans

Our Board of Directors adopted, and our stockholders approved, our 2009 Equity Incentive Plan (the “2009 Plan”) on October 19, 2009.  The 2009 Plan reserves a total of 5,000,000 shares of our common stock for issuance pursuant to awards granted thereunder.  If an incentive award granted under the 2009 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2009 Plan.

As of the date of this prospectus, we have outstanding 1,266,667 nonqualified stock options under the 2009 Plan, with a weighted average exercise price of approximately $0.39 per share, of which options for 266,667 are currently vested.  In addition, we have granted an award of 2,500,000 shares of restricted stock under the 2009 Plan, of which 500,000 shares are currently issued and vested and we have granted an award of restricted stock units with respect to 700,000 shares of common stock, none of which are currently vested.  For all option grants, our Board of Directors has set (or will set) the exercise price of the options at a price equal to or greater than the fair market value of our common stock on the date of grant of the options.  Of the outstanding options under the 2009 Plan, 266,667 have vested.  250,000 of such options vested immediately, with 200,000 having a five year term and 50,000 having a two year term.  Another 16,667 outstanding options were included in grants of an aggregate of 550,000 options under the 2009 Plan that would have vested in in three equal installments on each of the first, second and third anniversary of the date of grants, however, the unvested portions terminated upon the holders’ respective resignations and the vested portions terminated (or will terminate) three months after the respective resignations.  The other 1,000,000 outstanding options under the 2009 Plan vest in three equal installments on each of the first, second and third anniversary of the date of grant and have a ten year term.
 
 
34

 

The following table provides information as of June 30, 2011, with respect to the shares of common stock that may be issued under our existing equity compensation plans:
 
Plan Category
 
Number of securities to
be
issued upon exercise of
outstanding options,
warrants and rights
   
Weighted-average
exercise price of
outstanding options,
warrants and rights
   
Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities reflected
in column (a))
 
   
(a)
   
(b)
   
(c)
 
Equity compensation plans approved by security holders (1)
   
1,800,000
   
$
0.35
     
 
Equity compensation plans not approved by security holders
   
     
     
 
Total
   
1,800,000
   
$
0.35
     
 

(1)
Represents the 2009 Equity Incentive Plan.

See “Executive Compensation” for information regarding individual equity compensation arrangements received by our executive officers pursuant to their employment agreements with us.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed in “Risk Factors” and elsewhere in this prospectus.

Li3 Energy, Inc. (“Li3 Energy,” the “Company,” “we,” “us” or “our”) is an exploration company, focused on the discovery and development of lithium and potassium brine and nitrate and iodine deposits in Chile, Argentina and Peru.

We own (a) a 60% interest in the Maricunga project, which consists of mining concessions covering an area of approximately 3,553 acres (1,438 hectares) prospective for lithium and potassium brines, and is located in the Salar de Maricunga in northern Chile; (b) a mining concession on 2,995 acres (1,212 hectares) situated on brine salars in Argentina, known as Cauchari; and (c) undeveloped mineral claims prospective for lithium and potassium covering a total area of 19,500 acres (7,890 hectares) located in the Regions of Puno, Tacna and Moquegua, Peru. We are currently evaluating additional exploration and production opportunities.

We were incorporated on June 24, 2005, as Mystica Candle Corp. and were originally in the business of manufacturing, marketing and distributing soy-blend scented candles and oils.  We determined that we could not continue with our business operations as outlined in our original business plan because of a lack of financial results and resources; therefore, we redirected our focus towards identifying and pursuing options regarding the development of a new business plan and direction. In July 2008 we changed our name from Mystica Candle Corp. to NanoDynamics Holdings, Inc., to facilitate discussions with NanoDynamics, Inc., a Delaware corporation, regarding a possible business combination. However, we determined not to proceed with that business combination.  In October 2009, we changed our name from NanoDynamics Holdings, Inc., to Li3 Energy, Inc., as we refocused our business strategy on the energy sector and lithium mining opportunities.

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion contains forward-looking statements. Please see “Note Regarding Forward-Looking Statements”  and “Risk Factors,” above, for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.

 
35

 

The following discussion and analysis of our financial condition and results of operations as of, and for the years ended, June 30, 2011 and 2010, are based on our audited consolidated financial statements as of June 30, 2011, and for the years ended June 30, 2011 and 2010.
 
You should read this discussion and analysis together with such consolidated financial statements and the notes thereto.

Going Concern

The Company currently has positive working capital of $4,710,301 at September 30, 2011, but no sources of recurring revenue and has generated net losses of $31,621,794 and negative cash flows from operations of $7,198,229 during the period from June 24, 2005 (inception) through September 30, 2011.

In the course of its exploration activities, the Company has sustained and continues to sustain losses.  The Company cannot predict if and when the Company may generate profits.  In the event the Company identifies commercial reserves of minerals, the Company will require substantial additional capital to develop those reserves.  The Company expects to finance its operations primarily through future financings. However, there exists substantial doubt about the Company’s ability to continue as a going concern because there is no assurance that it will be able to obtain such capital, through equity or debt financing, or any combination thereof, on satisfactory terms or at all. Additionally, no assurance can be given that any such financing, if obtained, will be adequate to meet the Company’s ultimate capital needs and to support its growth. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, then the Company’s operations would be materially negatively impacted.

Our ability to complete additional equity or debt offerings is dependent on the state of the debt and/or equity markets at the time of any proposed offering, and such market’s reception of us and the offering terms. In addition, our ability to complete an offering may be dependent on the status of our exploration activities, which cannot be predicted. There is no assurance that capital in any form would be available to us, and if available, on terms and conditions that are acceptable.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required until such time as it can generate sources of recurring revenues and to ultimately attain profitability.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 
36

 

Operational Update

Chile

Maricunga

On November 30 and December 1, 2010, the Company signed non-binding exclusive letters of intent with the shareholders (the “Maricunga Sellers”) of Sociedades Legales Mineras Litio 1 a 6 de la Sierra Hoyada de Maricunga, a group of six private companies (the “Maricunga Companies”), to acquire at least 51%, up to a maximum of 60%, ownership of the Maricunga Companies, which collectively own the Maricunga Project (“Maricunga”).  The Maricunga property is undeveloped and covers an area of approximately 3,553 acres (1,438 hectares), comprising six exploitation mining concessions, each held by a separate legal entity, and is located in the northeast section of the Salar de Maricunga in Region III of Atacama in northern Chile.   Each concession grants the owner the right to explore for mineral deposits at the Maricunga property.

On May 20, 2011, the Company and the Maricunga Sellers signed the Framework Contract of Mining Project Development and Buying and Selling of Shares of Sociedades Legales Mineras Litio 1 a 6 de la Sierra Hoyada de Maricunga (the “Acquisition Agreement”), whereby the Company, through its Chilean subsidiary, Minera Li Energy SPA, acquired from the Maricunga Sellers a 60% interest in each of the Maricunga Companies (the “Maricunga Shares”). The purchase price was $6,370,000 in cash and 127,500,000 restricted shares of common stock of the Company (the “Maricunga Purchase Price Shares”), 50% of which is restricted from sale for nine months and the remainder of which is restricted from sale for 18 months as provided in the Acquisition Agreement (the “Lock-Up”).  The Lock-Up will terminate if (a) we sign an agreement with one or more investors for them to finance the necessary development of the project to the stage of commercial production; (b) an offer with characteristics of a take-over bid is made for our shares; (c) our current CEO sells his shares in the Company, or (d) we agree to sell our shares in Minera Li Energy SPA and/or Minera Li Energy SPA agrees to the sale of the Maricunga Shares.  In the event of (d) above, we have agreed that the sale price in any such sale will be based on at least two valuations carried out by institutions with recognized experience in these types of mining assets. The $6,370,000 in cash includes the $250,000 deposit paid in December 2010 and a $120,000 gross-up for the fees of certain agents to the Maricunga Sellers. On June 2, 2011, upon the registration in Chile of the transfer of the shares in the Maricunga Companies to Minera Li Energy SPA, the closing occurred and the remaining $6,120,000 cash and Maricunga Purchase Price Shares were released from escrow and paid to the Maricunga Sellers.  The Company has agreed to register, under the Securities Act, half of the Maricunga Purchase Price Shares by January 31, 2012, and the remainder by October 31, 2012. In signing the Acquisition Agreement, the Company also committed to finance upon closing, up to $5 million for technical feasibility studies for the project within 180 days of closing.  The Company estimates that capital expenditures for this project will be approximately $170 million.

We have agreed with the Maricunga Sellers:  (a) to increase the number of directors constituting our Board of Directors to seven; (b) that the Maricunga Sellers will have the right to nominate three of our directors and that a fourth director (who shall hold of the position of Chairman of the Board) will be jointly nominated by the Maricunga Sellers and by our management (such persons, or any successors thereto nominated by the Maricunga Sellers or by the Maricunga Sellers and management, as the case may be, the “Nominees”), and that the Board shall appoint such Nominees to fill vacancies created in the Board by the increase in the number of directors and by resignations, to serve until the next annual meeting of stockholders; (c) that the Nominees shall continue to be nominated as directors by our management at the next and subsequent annual meetings of our stockholders, and at any special meeting of the stockholders at which directors are to be elected (collectively, a “Meeting”), during the period of the Lock-Up (but the Nominees will be subject to reelection by the stockholders as provided in our By-Laws); and (d) that if any Nominee is not elected by the stockholders pursuant to the By-Laws, the Maricunga Sellers, or the Maricunga Sellers and management, as the case may be, will have the right to designate the same or another person as their Nominee at the next Meeting, provided it is within the period of the Lock-Up.

Previous exploration work has been done in Maricunga.  During the 1980’s, the “Comite de Sales Mixtas” CORFO (State Agency of the Republic of Chile) carried out a study in order to determine the potential in inorganic salts of commercial interest of the Salars. After performing a sampling and chemical analysis program, CORFO made certain estimates of mineral resources at the Salar de Maricunga.

In 2007, the owners of the Project started the first campaign of exploration by drilling 58 wells on a systematic grid of 500 m2 with a depth of 20 meters in each well. After following certain protocols, 226 liquid samples were taken from the wells and were sent to the Cesmec laboratory in Antofagasta for analysis.

As part of our due diligence for the Maricunga acquisition, we conducted a preliminary brine sampling program in the first calendar quarter of 2011 which consisted of 104 samples, and results from these samples confirm the results of the 2007 shallow well sampling program and the historical sampling work performed by CORFO.

In September 2011, POSCO Canada Ltd. (“POSCAN”), a wholly owned subsidiary of POSCO (a South Korean company), purchased 38,095,300 Units of our securities for approximately $8 million, with each “Unit” consisting of one share of our common stock and a three-year warrant to purchase one share of our common stock at an exercise price of $0.40.  POSCAN will purchase an additional 47,619,000 Units at the same $0.21 price per Unit (for an aggregate additional purchase price of approximately $10 million) upon satisfaction of certain conditions.  The agreement with POSCAN includes provision for POSCAN to purchase brine from the Maricunga property and test it at POSCAN’s test facility in Korea.  In addition, we and POSCAN will discuss and evaluate the development, financing and construction of a brine testing facility on the Maricunga property, and if such a facility is built, we would supply the test facility with brine and other materials and utilities and assist POSCAN in obtaining any rights, licenses and permits required to build and operate such facility. POSCO (with its subsidiaries) is a diversified company, with operations in energy, chemicals and materials and is one of the largest steel manufacturers in the world.

 
37

 

We are now beginning our phase one exploration and development plan on Maricunga with the $8 million of funding from POSCAN.  Our goal is to achieve a Measured and Indicated 43-101 Resource Report on Maricunga using these funds.  In addition to being the relevant milestone under our agreement with POSCAN, we believe that the Canadian standards for Resource Reports are generally perceived as the industry standard, having marketability worldwide. In order to reach this goal, we plan to perform the following activities, among other things:

 
1.
We have already obtained permits for our proposed seismic and drilling program and test facility construction;

 
2.
A high resolution p-wave seismic refraction tomography survey;

 
3.
Sonic core sample drilling;

 
4.
Well drilling construction and RC drilling;

 
5.
Pump tests (i) to evaluate the hydraulic parameters of the salar, (ii) to supply quantities of production well brine for testing, and (iii) to stress the salar aquifer and measure the hydraulic response;

 
6.
Laboratory process simulations to test multiple potential process routes and generate laboratory scale quantities of lithium products;

 
7.
Construct a test facility near the salar in order to collect data;

 
8.
Undertake an environmental impact study.

We expect to complete these activities (other than the environmental impact study) by the end of the first calendar quarter of 2012.  If successful, and we satisfy the conditions for and receive the additional $10 million of funding from POSCO Canada Ltd., we plan to use such funds to complete a feasibility study on Maricunga.

In addition, we are continuously evaluating more properties to acquire adjacent to Maricunga, as we seek to expand our land package in the area.  We may also seek to acquire additional properties for any processing site and we also plan to make improvements to the Maricunga site infrastructure, camp, and property.

Alfredo

On August 3, 2010, the Company entered into a Stock Purchase Agreement (“Alfredo SPA”) with Pacific Road Capital A Pty. Limited, as trustee for Pacific Road Resources Fund A (“Fund A”), Pacific Road Capital B Pty. Limited, as trustee for Pacific Road Resources Fund B (“Fund B”), and Pacific Road Capital Management G.P. Limited, as General Partner of Pacific Road Resources Fund, L.P. (“PR Partnership” and, together with Fund A and Fund B, “Alfredo Sellers”) to acquire all of the outstanding shares of Alfredo Holdings, Ltd. (“Alfredo”).  Alfredo owns 100% of the share capital of Pacific Road Mining Chile, SA, a Chilean Corporation (“PRMC”).  PRMC is a special purpose Chilean corporation which entered into an Option to Purchase Agreement, dated June 6, 2008, that gave PRMC the option to acquire 100% of six mining concessions with respect to approximately 6,669 acres of mining tenements near Pozo Almonte, Chile (the “Alfredo Property”).

Pursuant to the Alfredo SPA, the Company issued an aggregate of 10,000,000 shares of common stock (the “Purchase Price Shares”) valued at $3,900,000 ($0.39 per share) to the Alfredo Sellers and their designees.  Of the Purchase Price Shares, 8,800,000 shares of common stock that the Company issued directly to the Alfredo Sellers are subject to an 18 month lock-up period pursuant to the Alfredo SPA.   Details of the terms of the acquisition and option (including future payments we may be obligated to make to the Alfredo Sellers) are contained in Our Annual Report on Form 10-K/A for the year ended June 30, 2010, under Part I, Item 1, “Business—Our Projects—Chile—Alfredo” and are incorporated by reference herein.

 
38

 

The Alfredo SPA also provided for contingent payments in the event certain milestones were achieved, which provisions were later amended by the signing of the SPA Amendment discussed below.

Under the Option to Purchase Agreement, PRMC was required to make additional periodic payments aggregating $360,000 between June 30, 2010 and December 30, 2010.  The Company paid, through PRMC, $80,000 in August 2010 and was required to make payments of $100,000 by October 30, 2010 and $180,000 by December 30, 2010 in order to maintain PRMC’s option rights.  Then, in order to exercise the option and purchase the Alfredo Property, the Company would have been required to pay the option exercise price of $4,860,000 by March 30, 2011.  The Company did not make the $100,000 payment on October 30, 2010, the $180,000 payment on December 30, 2010 or the option exercise price payment of $4,860,000 on March 30, 2011.  Under the terms of the option agreement, the option terminated as a result of the Company not making the required option payments within the specified default and cure periods, and the Company therefore recorded impairment expense for the Alfredo property of $4,070,000 during the year ended June 30, 2011.

As of March 30, 2011, the Company signed an Amending Agreement (the “SPA Amendment”) with respect to the Alfredo SPA with the Alfredo Sellers. If the Alfredo Sellers had closed on a proposed subscription of $2,000,000 in the Company’s 2011 Offering, the SPA Amendment would have adjusted the terms upon which the Alfredo Sellers could invest in the Company pursuant to an option granted under the Alfredo SPA. The Alfredo Sellers did not subscribe to the 2011 Offering. However, the SPA Amendment did change the Alfredo SPA as it relates to the Contingent Payments as noted below.

Pursuant to the SPA Amendment, if and when the following milestones (“Milestones”) are achieved with respect to the Alfredo Property or any other Li3 Energy Chilean iodine nitrate project, the Company will make the following additional payments (“Contingent Payments”) to the Alfredo Sellers:

         a)           $1,000,000 upon the Board of Directors’ resolution to commence final engineering and design of theAlfredo Mine or any other Li3 Energy Chilean iodine nitrate property;

         b)           A further $2,000,000 upon the Board of Directors’ resolution to commence construction of the Alfredo Mine or any other Li3 Energy Chilean iodine nitrate property;

         c)           A further $2,500,000 upon commencement of commercial production from the Alfredo Mine (meaning production at a rate of 75% of design capacity for 3 months) or any other Li3 Energy Chilean iodine nitrate property;

In the event a Contingent Payment for any milestone is paid for any iodine nitrate property (including the Alfredo property), no Contingent Payment for the same milestone will be payable for any other Chilean iodine nitrate property. The Alfredo Sellers have the right to take any or all of the above milestone payments in shares of the Company’s common stock instead of cash, valued at the greater of (i) $0.25 per share or (ii) the average of the closing price of the common stock on the 30 trading days immediately preceding the relevant payment date.  The Company is under no obligation to achieve or pursue any of the milestones and the Company currently does not own, or have any rights, to the Alfredo property or any other Chilean iodine nitrate properties. The SPA Amendment was in anticipation of the Company re-acquiring rights to the Alfredo property or another Chilean iodine nitrate property (which has not yet occurred).

We have not undertaken any exploration and development activities on the Alfredo Property.  As of the date of this filing, we are not in discussions with the owners of Alfredo to reacquire the option to purchase the Alfredo Property, and there can be no assurance that a new option will be executed.  We are actively exploring opportunities to acquire other iodine/sodium nitrate prospects in addition to or in lieu of the Alfredo property; however, there can be no assurance that suitable prospects will be available on terms acceptable to us or that any such acquisition will be successfully completed.

Peru

On February 23, 2010, we acquired 100% of the assets of the Loriscota, Suches and Vizcachas Projects for an aggregate purchase price of $50,000.  Given our limited resources, we continue to develop plans to pursue exploration and/or development of the Peru properties.  Any such plans include development beyond a year and are subject to the availability of financing.  We continue to evaluate other nearby properties in Peru to potentially expand our land package in this region.  We have not performed, and have no plans to perform in the immediate future, any exploration and development work on these properties.  The Company recorded impairment expense of $50,000 for this property during the year ended June 30, 2011.

 
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Argentina

In July 2010, we acquired 100% of the issued and outstanding shares of Noto Energy S.A., an Argentinean corporation (“Noto”), which beneficially owns a 100% interest over 2,995 acres situated on brine salars in Argentina, known as Cauchari.  We are in the process of evaluating the Noto property.  Given our limited resources, we continue to develop plans to pursue exploration and/or development of the Noto property.  Any such plans include development beyond a year and are subject to the availability of financing.  We continue to evaluate other nearby properties in Argentina to potentially expand our land package in this region.

We plan to expend approximately $50,000 on preliminary exploration work on the Noto property between now and the end of the first calendar quarter of 2012.

Strategic Plan

Our strategic plan is to explore and develop our existing projects and to identify opportunities and generate new projects with near-term production potential, with the goal of becoming a company with valuable lithium or industrial minerals properties.  Our primary objective is to become a low cost lithium producer as well as a significant producer of potassium nitrate. We believe the key to achieving this objective will be to become an integrated chemical company through the strategic acquisition and development of lithium assets as well as other assets that have by-product synergies.

We have acquired a 60% interest in the Maricunga project, an advanced lithium and potassium chloride project in Chile, and we continue to explore other lithium and industrial minerals prospects in the region, located to complement the potential Alfredo project or other nearby iodine projects that we may acquire, in order to achieve integration of operations to produce metallurgical grade lithium, commercial grade fertilizer and pharmaceutical grade iodine.

Although we recorded an impairment charge to Alfredo of $4,070,000 during the year ended June 30, 2011, we continue to consider negotiating a new option agreement with the owners of Alfredo mining concessions to acquire the concessions.  There is no assurance that an agreement will be reached.

Our current strategy principally involves the exploration of the Maricunga property and the acquisition and exploration of the Alfredo property or another iodine/nitrate property.  On the Maricunga project, we expect to spend approximately $18.2 million of exploration and development expenses in order to complete a feasibility study on Maricunga. A “feasibility study” means a comprehensive study of a mineral deposit in which all geological, engineering, legal, operating, economic, social, environmental and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision whether to advance the development of the deposit for mineral production.  The Company is dividing this into two phases: (i) Spending $8 million to reach a Measured and Indicated Canadian National Instrument (“NI”) 43-101 compliant resource report, which is expected in the first calendar quarter of 2012; and, if phase one is successful, (ii) spending $10 million to bring Maricunga to feasibility.  In addition to being the relevant milestone under our agreement with POSCAN, we believe that the Canadian standards for Resource Reports are generally perceived as the industry standard, having marketability worldwide.  If we acquire the Alfredo Property, we would expect to spend approximately $6.3 million of acquisition costs (not including an additional up to $5.5 million payable to Alfredo Sellers upon certain post-feasibility milestones), and we would expect to incur approximately $2.7 million of exploration expenses in order to bring the Alfredo Property to the feasibility stage.   In the event we are unable to acquire the Alfredo Property, we will focus our efforts on the exploration of the Maricunga property, and we are also actively exploring opportunities to acquire other iodine/sodium nitrate prospects in addition to or in lieu of the Alfredo property, although there can be no assurance that suitable prospects will be available on terms acceptable to us or that any such acquisition will be successfully completed.

The life cycle of a brine mining operation can be divided into six phases:

 
·
Mining activity begins with the “exploration phase,” in which one seeks to define the type, extent, location and value of deposits and to estimate the grade and size of the deposits;
 
·
The exploration phase is followed by the “pre-feasibility phase,” in which the economics and risks of the project are determined;
 
·
The “feasibility phase” then ensues to address the financial viability of the project (including any permitting requirements) and to determine whether or not to proceed to development – the end of the feasibility stage is marked by the conclusion of a feasibility study;
 
·
If the decision is made to move forward after the feasibility stage, then the “development phase” follows, in which the infrastructure needed to begin operations is constructed;
 
·
Upon completion of such infrastructure, a project enters the “production phase,” during which the applicable minerals are extracted, produced and sold;
 
·
Once all economically extractable minerals have been produced, a mine is closed and it enters the “reclamation phase,” in which the area is made suitable for future uses.

Li3 is currently in the exploration phase, seeking to define the type, extent, location and value of deposits.

 
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In order to finance the up to approximately $15 million of expected acquisition and exploration costs outlined above over the next twelve months, as well as to fund the approximately $2.5 million of working capital we expect to require over the next twelve months, we will need to raise a substantial amount of funds through one or more offerings of our debt, equity or convertible securities, which may include the $10 million of equity financing conditionally committed by POSCAN.   There can be no assurance that such financing will be available, or will be available on acceptable terms, for us to meet these requirements.

In order to acquire the Alfredo Property, we must successfully complete the negotiation for and documentation of a new option or other acquisition agreement.  There can be no assurance that we will be successful in obtaining a new option on, or otherwise acquiring, Alfredo or in financing the cost of acquiring the Alfredo Property or the costs of exploring and developing Alfredo and Maricunga.

Results of Operations

Results of Operations for the three months ended September 30, 2011 compared to the three months ended September 30, 2010

Revenues

We had no revenues during the three months ended September 30, 2011 and 2010.

Exploration Expenses

During the three months ended September 30, 2011 and 2010, we incurred exploration expenses of $468,242 and $272,642, respectively.  The expenses incurred during the three months ended September 30, 2011 relate to our efforts to begin exploration activities on our Maricunga project in Chile and principally include direct expenses and consulting expenses.

General and Administrative Expenses

During the three months ended September 30, 2011 and 2010, we incurred general and administrative expenses of $1,250,196 and $831,227, respectively.  General and administrative expenses largely consist of professional services and consulting, travel, stock compensation, and salaries.  The increase in expenses incurred related primarily to higher legal fees, and higher payroll expenses during the three months ended September 30, 2011.

Other Income (Expense)

Other income for the three months ended September 30, 2011, was $5,558,418 compared to other income of $2,767,412 for the three months ended September 30, 2010.  The increase in other income was due to our recognition of an unrealized gain from the change in the fair value of the derivative liability related to our outstanding warrant instruments of $6,948,644 during the three months ended September 30, 2011 compared to $2,772,726 during the three months ended September 30, 2010.  The change in fair value of our derivative warrant liability has no impact on our cash flow from operations.

Interest expense amounted to $534,204 and $1,944 during the three months ended September 30, 2011 and 2010, respectively.  The large increase in interest expense was a result of interest and amortization of the debt discount on the $1.5 million zero coupon convertible notes entered into in May 2011.   The Company also incurred a loss on debt extinguishment of $841,752 as a result of entering into a waiver agreement with the lenders whereby the terms of the notes were extended and the conversion price reduced from $0.40 per share to $0.12 per share, which resulted in the Company expensing all unamortized deferred financing costs and recording the difference between the carrying value of the notes and the estimated fair value of the post-modification notes as expense.  During the three months ended September 30, 2011 and 2010, we incurred losses on foreign currency translation of $14,985 and $3,437, respectively, and such losses related to our operations in Peru and Chile.

Results of Operations for fiscal 2011 compared to fiscal 2010

The following is a comparison of our results of operations for the years ended June 30, 2011 and 2010.

Revenues

We had no revenues during the years ended June 30, 2011 and 2010, respectively.

Operating Expenses

Mineral rights impairment expense

During the years ended June 30, 2011 and 2010, mineral rights impairment expense was $4,120,000, and $4,718,785, respectively.  Mineral rights impairment expense for the year ended June 30, 2011 is a result of the impairments of the Alfredo property ($4,070,000) and Peru property ($50,000).  Mineral rights impairment expense for the year ended June 30, 2010 is a result of the impairment of the Puna ($742,178) and Nevada ($3,976,607) properties. We determined that the Peru, Puna and Nevada projects did not meet our requirements for additional mining development activities. We did not make the required option payments for the Alfredo property; therefore we impaired the mineral rights in full for that property.
 
 
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Loss on settlements, net

During the year ended June 30, 2011, the Company recorded a loss on settlement of $1,920,000 as a result of the Company issuing 6,000,000 shares of the Company’s common stock in connection with a settlement related to Puna.  In addition, the Company recorded a gain on settlement of $422,500 as a result of a settlement with Lacus (payment of $150,000 in cash and 500,000 shares of the Company’s common stock), which was less than the Company had accrued for these expenses as of June 30, 2010.

Exploration expenses

During the years ended June 30, 2011 and 2010, we incurred exploration expenses of $560,075 and $2,335,779, respectively.  The expenses were lower in fiscal 2011 compared to fiscal 2010 principally due to the Company focusing its efforts on the completion of the Maricunga acquisition throughout fiscal 2011.  During the year ended June 30, 2010,  exploration expenses related to our efforts to secure strategic mineral rights in North and South America, mainly Puna and Nevada.  Exploration expenses include direct expenses, consulting expenses in connection with potential mining operation investment opportunities, and travel.

General and administrative expenses

During the years ended June 30, 2011 and 2010, we incurred general and administrative expenses of $5,448,667 and $2,762,102, respectively.  During the year ended June 30, 2011, general and administrative expenses were largely comprised of approximately $2.7 million of stock-based compensation, $1 million of legal expenses and $.5 million of travel expenses.  During the year ended June 30, 2010, general and administrative expenses largely consisted of $1.1 million of stock-based compensation, $.5 million of legal expenses and $.4 million of travel expenses.   The increase in general and administrative expenses from fiscal year 2010 to fiscal year 2011 was due to higher stock-based compensation and the Company having a full year of operations during the year ended June 30, 2011.

Other income (expense)

Warrant modification expense

During the year ended June 30, 2011, the Company modified certain warrants by which the Company issued new warrants in exchange for the exercise of previously issued warrants.  The newly issued warrants were treated as derivatives as they contain certain anti-dilution features.  The Company valued the new warrants issued as a result of the modification using the modified lattice model and recorded expense of $1,068,320 during the year ended June 30, 2011.

Change in fair value of derivative liability – warrant instruments

During the year ended June 30, 2011, the Company recorded an expense of $6,116,147 on the change in fair value of derivative liability – warrant instruments, compared to an expense of $6,223,547 during the year ended June 30, 2010.  The expense incurred during the years ended June 30, 2011 and 2010 was largely the result of issuing new warrants in connection with private placement offerings.

Interest expense

During the years ended June 30, 2011 and 2010, interest expense was approximately $410,590 and $7,713, respectively.  The increase in interest expense is attributable to the interest cost on the $1.5 million convertible offering in May 2011, and the amortization of the related deferred financing costs.

Liquidity and Capital Resources

Due to our brief history and historical operating losses, our operations have not been a source of liquidity, and our primary sources of liquidity have been debt and proceeds from the sale of our equity securities in several private placements.

Although we have begun the acquisition of certain mining properties, any of such properties that we may acquire will require exploration and development that could take years to complete before it begins to generate revenues.  There can be no assurances that we will be successful in acquiring such properties or that if we do complete acquisitions, properties acquired will be successfully developed to the revenue producing stage.  If we are not successful in our proposed mining operations, our business, results of operations, liquidity and financial condition will suffer materially.

Various factors outside of our control, including the price of lithium and other minerals, overall market and economic conditions, the downturn and volatility in the US equity markets and the trading price of our common stock may limit our ability to raise the capital needed to execute our plan of operations.  We recognize that the US economy is currently experiencing a period of uncertainty and investor appetite for our securities may not be at their peak.  These or other factors could adversely affect our ability to raise additional capital.  As a result of an inability to raise additional capital, our short-term or long-term liquidity and our ability to execute our plan of operations could be significantly impaired.

During the year ended June 30, 2011, we raised $7,935,828 (net of offering costs of $1,012,360) from private placement offerings, and $1,433,575 from the exercise of warrants  and $1,500,000 from the issuance of zero-coupon convertible notes (as described below). Subsequent to June 30, 2011, we raised an additional $7,900,000 (net of offering costs of approximately $100,000) from a private placement offering with POSCAN.
 
 
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On May 2, 2011, the Company entered into and simultaneously closed a Credit Agreement for a $1.5 million bridge loan with three private institutional investors. Under the Credit Agreement, the Company issued to each lender a zero-coupon original issue discount note due February 2, 2012. The notes were originally convertible into shares of the Company’s common stock at the lender’s option at a price of $0.40 per share. The aggregate face amount of the notes at maturity is $1,677,438. The Company may prepay the notes at its option (together with accrued original issue discount), and was required to prepay them (together with accrued original issue discount) first out of the net proceeds of any future capital raising transactions by the Company. In connection with the transactions with POSCAN, we have entered into an Amendment and Waiver Agreement with the holders of our zero-coupon bridge notes, dated as of August 25, 2011 (the “Waiver Agreement”).  Pursuant to the Waiver Agreement, effective upon the closing of POSCAN’s initial $8 million investment, the zero-coupon bridge notes are now due on June 30, 2012, and we will not be required to make any prepayment out of the proceeds of the POSCAN investment.  The Waiver Agreement does not alter the principal amount of the zero-coupon bridge notes; however, it provides that such notes will accrue interest at a rate of 15% per annum from February 2, 2012, until June 30, 2012.  The Waiver Agreement also reduces the conversion price of the zero-coupon bridge notes to $0.12 per share.  In connection with the Waiver Agreement, we have agreed to pay an arranger a cash fee of $30,000.  The foregoing is a summary of the principal terms of the Waiver Agreement and is qualified in its entirety by the detailed provisions of the actual agreement, which is incorporated by reference as an exhibit to the registration statement of which this prospectus is a part and is incorporated herein by reference.

The Company also agreed to issue to the lenders warrants to purchase an aggregate of 1,500,000 shares of common stock, exercisable for five years at an initial exercise price of $0.50 per share (the “Lender Warrants”).  The Lender Warrants contain provisions that protect holders from future issuances of the Company’s common stock at prices below such warrants’ respective exercise prices and these provisions could result in modification of the warrants exercise price based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 – 40.  The fair values of the Lender Warrants were recognized as derivative warrant instruments at issuance and are measured at fair value at each reporting period. The Company determined the fair value of the warrants was $1,132,000 at the issuance date. This amount was recorded as a debt discount and is being amortized to interest expense over the term of the debentures.

The convertible debentures were analyzed for a beneficial conversion feature at which time it was concluded that a beneficial conversion feature existed.  The beneficial conversion feature was measured using the commitment-date stock price and was determined to be $368,000.  This amount was recorded as a debt discount and is being amortized to interest expense over the term of the debentures.

The Company agreed to pay finder’s fees consisting of cash in the amount of 5% of the aggregate issue price of the notes, or $75,000 in total, and warrants to purchase an aggregate of 75,000 shares of common stock, exercisable for five years at an initial exercise price of $0.40 per share (the “Arranger Warrants”).  The Arranger Warrants contain provisions that protect holders from future issuances of the Company’s common stock at prices below such warrants’ respective exercise prices and these provisions could result in modification of the warrants exercise price based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 – 40.  The fair value of the Arranger Warrants were recognized as derivative warrant instruments at issuance and are measured at fair value at each reporting period. The Company determined the fair value of the Arranger Warrants at the issuance date was $57,570, which was recorded as deferred financing costs.  The deferred financing costs of $132,750 will be amortized over the life of the debt on a straight-line basis which approximates the effective interest method.  During the year ended June 30, 2011, the Company recorded $29,500 of interest expense on deferred financing costs.

 
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In addition to utilizing our capital to acquire properties and pay other corporate costs, we periodically issue shares of our common stock as consideration in lieu of cash to conserve our cash and meet our obligations.  We likely will continue to issue common stock for these purposes where feasible, if we determine that it is in our economic best interests.

We have been using the net proceeds from the 2010 and 2011 private placements, the zero-coupon notes and exercises of warrants towards the implementation of our business development plan and for general working capital purposes.  As a result of the funds invested by investors in our April and May 2011 private placement and the funds invested by POSCAN on September 14, 2011, we estimate that we have sufficient funds to carry out our current strategic plan of exploration and development and meet our ongoing operational working capital needs through March 2012 (assuming we do not expend cash for other acquisitions).  We will require additional capital after that to pay our obligations and to execute our exploration and development plans for our existing lithium mining properties and any others that we may be successful in acquiring.  We plan to seek to raise such capital through additional sales of our equity or debt securities.  There can be no assurance, however, that such financing will be available to us or, if it is available, that it will be available on terms acceptable to us and that it will be sufficient to fund our expected needs.  If we are unable to obtain sufficient financing, we may not be able to proceed with our exploration and development plans or meet our ongoing operational working capital needs.

Our strategy currently principally involves the exploration of the Maricunga property and the acquisition and exploration of an iodine/nitrate property.  On the Maricunga project, we expect to spend approximately $18.2 million of exploration and development expenses in order to complete a feasibility study on Maricunga. The Company is dividing this into two phases: (i) Spending $8 million to reach a Measured and Indicated 43-101compliant resource, which is expected in the first calendar quarter of 2012; and, if phase one is successful, (ii) spending $10 million to bring Maricunga to feasibility.  If we acquire the Alfredo Property, we would expect to spend approximately $6.3 million of acquisition costs (not including an additional up to $5.5 million payable to Alfredo Sellers upon certain post-feasibility milestones), and we would expect to incur approximately $2.7 million of exploration expenses in order to bring the Alfredo Property to the feasibility stage.  In the event we are unable to acquire the Alfredo Property, we will focus our efforts on the exploration of the Maricunga property, and we are actively exploring opportunities to acquire other iodine/sodium nitrate prospects in addition to or in lieu of the Alfredo property, although there can be no assurance that suitable prospects will be available on terms acceptable to us or that any such acquisition will be successfully completed.

In order to finance the up to approximately $15 million of expected acquisition and exploration costs outlined above over the next twelve months, as well as to fund the approximately $2.5 million of working capital we expect to require over the next twelve months, we will need to raise a substantial amount of funds through one or more offerings of our debt, equity or convertible securities, which may include the $10 million of equity financing conditionally committed by POSCAN.   There can be no assurance that such financing will be available, or will be available on acceptable terms, for us to meet these requirements.

In order to acquire the Alfredo Property, we must successfully acquire a new option.   There can be no assurance that we will be successful in obtaining a new option on Alfredo or in financing the cost of exercising the option or the costs of exploring and developing Alfredo and Maricunga.

Investment Agreement

We have entered into an Investment Agreement (the “Investment Agreement”) with Centurion Private Equity, LLC (the “Investor”), dated as of December 2, 2010, pursuant to which, subject to certain conditions, we could sell newly issued shares of our common stock (the “Put Shares”) to the Investor from time to time during the commitment period (each such sale, a “Put”) subject to certain dollar and share volume limitations for each Put.  Provided that the relevant conditions are met, we could make Puts under the Investment Agreement from time to time until 24 months from the date the Centurion Registration Statement (as defined below) is declared effective or until all Puts under the Investment Agreement have reached an aggregate gross sales price of $10 million, if sooner.
 
 
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Pursuant to the Investment Agreement, we issued to the Investor 1,551,253 shares of our common stock (the “Commitment Shares”) and we had previously issued to an affiliate of the Investor an additional 87,096 shares of our common stock (the “Fee Shares”).  The Investment Agreement provides that, prior to making any Put, among other things, we were required to have a registration statement declared effective with respect to the resale of the Commitment Shares, Fee Shares and Put Shares (the “Centurion Registration Statement”).

The Investment Agreement prohibits our issuance of Variable Equity Securities (as defined therein), which are generally future-priced securities or securities with price reset provisions, during the period after the date of the Investment Agreement and prior to 30 days after the Termination Date (as defined therein).  The Investment Agreement further provides that, subject to certain exceptions, the Investor shall have a right of first refusal with respect to any private capital raising transactions involving our equity securities that closes between the date of the Investment Agreement and 60 days after the Termination Date.

On September 14, 2011, we delivered a Notice of Termination to the Investor to terminate the Investment Agreement.  Nonetheless, certain provisions of the Investment Agreement will survive for a period of time following such termination to the extent provided in the Investment Agreement.  Notably, the Investor’s right of first refusal survives for a period of 60 days following the termination of the Investment Agreement.

POSCO
 
On August 24, 2011, we entered into a Securities Purchase Agreement (the “SPA”) and an Investor Rights Agreement (the “IRA”) with POSCO Canada Ltd., a wholly owned subsidiary of POSCO (“POSCAN”) (together, the “POSCAN Agreements”), pursuant to which on September 14, 2011, POSCAN purchased 38,095,300 Units of our securities for approximately $8 million, with each “Unit” consisting of one share of our common stock and a three-year warrant to purchase one share of our common stock at an exercise price of $0.40.   

POSCAN will purchase an additional 47,619,000 Units at the same $0.21 price per Unit (for an aggregate additional purchase price of approximately $10 million) upon satisfaction of certain conditions, including:  (i) completion of an updated Measured and Indicated Resource Report prepared in compliance with NI 43-101 standards that concludes that our Maricunga property meets certain technical requirements and that proceeding to conduct a feasibility study on the Maricunga project is warranted; (ii) completion of a work program agreed to by us and POSCAN; and (iii) having the necessary permits and approvals in place for building and operating a brine test facility on the Maricunga property.  In addition to being the relevant milestone under our SPA with POSCAN, we believe that the Canadian standards for Resource Reports are generally perceived as the industry standard, having marketability worldwide.  The SPA provides that we are to use the proceeds from such investments exclusively for activities related to the development of the Maricunga project, pursuant to budgets mutually agreeable to us and POSCAN.

The SPA includes provision for POSCAN to purchase brine from the Maricunga property and test it at POSCAN’s test facility in Korea.  In addition, the SPA provides that we and POSCAN will discuss and evaluate the development, financing and construction of a brine testing facility on the Maricunga property, and that if such facility is built, we would (i) supply the test facility with brine and other materials and utilities and (ii) assist POSCAN in obtaining any rights, licenses and permits required to build and operate such facility.

The securities purchased by POSCAN will be locked up and may not be sold (subject to customary exceptions) until June 14, 2012.  Pursuant to the IRA, we have granted POSCAN the right to demand registration of the common stock included in the Units, and issuable upon exercise of the warrants included in the Units, commencing 12 months after the date of issuance of the Units and ending five years after the date of the IRA.  Our obligation to register any such shares shall terminate once they may be sold without registration in any 30 day period pursuant to Rule 144 under the Securities Act.  Upon a registration demand made by POSCAN pursuant to the IRA, we must file a registration statement covering the relevant shares within 75 calendar days of such demand, and use our best efforts to have it declared effective within 120 calendar days of filing.  If we do not meet these deadlines, we must pay liquidated damages of 2% of the purchase price of the relevant securities per month until such failures are cured (up to an aggregate maximum of 10%).  POSCAN will also have “piggy-back” registration rights with respect to such shares.

The IRA provides that we will appoint a director nominated by POSCAN to our Board of Directors, and will continue to nominate a POSCAN-designee at each annual meeting for as long as POSCAN owns not less than 10% of the issued and outstanding shares of our common stock.  (On June 14, 2011, our Board of Directors appointed Hyundae Kim as a director as POSCAN’s designee.  See “Directors, Executive Officers, Promoters and Control Persons—Executive Officers and Directors” below.)   So long as POSCAN holds any shares of our common stock (subject to customary exceptions), we shall not issue any new securities to any person unless we have also offered to POSCAN the right to purchase its pro rata share of such securities on the same terms and conditions as are offered, as to maintain its then percentage interest in our outstanding capital.  The IRA also provides that, until the earlier of (i) POSCAN owning less than 10% of our issued and outstanding common stock and (ii) our aggregate market capitalization exceeding $250 million, we may not undertake certain actions without the approval of POSCAN (which approval may be evidenced by the affirmative vote or consent of POSCAN’s director nominee), including:  a liquidation, merger or reorganization; a sale of all or substantially all of our assets; incurring indebtedness in excess of $1,000,000 (subject to certain exceptions); create or take any action that results in our holding the capital stock of any subsidiary that is not wholly owned (with certain exceptions); transfer or license our proprietary technology to a third party; substantially change the scope of our business; or amend or waive any non-competition or non-solicitation provision applicable to our Chief Executive Officer or Chief Operating Officer.
 
 
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The foregoing is a summary of the principal terms of the SPA and the IRA and is qualified in its entirety by the detailed provisions of the actual agreements, which are incorporated by reference as exhibits to the registration statement of which this prospectus is a part and are incorporated herein by reference.

POSCO (with its subsidiaries) is a diversified company, with operations in energy, chemicals and materials and is one of the largest steel manufacturers in the world.   There can be no assurance that any final agreement will be reached with POSCAN with respect to a pilot plant, a commercial plant, any further investment by POSCAN, any purchase by POSCAN of our production, or otherwise.

At June 30, 2011, we had cash and cash equivalents of $952,401, as compared to $302,821 at June 30, 2010.  The Company received $10,794,403 of cash from financing activities as a result of net proceeds from the issuance of common stock of ($7,935,828), proceeds from the exercise of warrants ($1,433,575) and proceeds from convertible debt ($1,500,000), partially offset by the payment of $75,000 of deferred financing costs.  The Company used $6,550,000 of cash in investing activities as a result of $6,370,000 of payments for the acquisition of Maricunga, $100,000 for the acquisition of Noto, and $80,000 for an option payment on Alfredo.  The Company used $3,594,823 of cash in connection with the operating activities of the Company during fiscal 2011.  At September 30, 2011, we had cash and cash equivalents of $7,326,933, compared to $952,401 at June 30, 2011.  The increase in cash and cash equivalents from June 30, 2011 to September 30, 2011 was the result of the Company receiving $7,484,069 of cash from financing activities due to the Company receiving $7,314,069 of net cash proceeds from the sale of units to POSCAN and $200,000 from the exercise of warrants and was reduced by a $30,000 fee for the Waiver Agreement.  These amounts are partially offset by the cash used in operating activities $1,052,692 and the acquisition of fixed assets $56,845.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States GAAP.  U.S. GAAP represents a comprehensive set of accounting and disclosure rules and requirements.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions, however, in the past the estimates and assumptions have been materially accurate and have not required any significant changes. Should we experience significant changes in the estimates or assumptions that would cause a material change to the amounts used in the preparation of our financial statements, material quantitative information will be made available to investors as soon as it is reasonably available.

We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Mineral Exploration and Development Costs
 
All exploration expenditures are expensed as incurred.  Costs of acquisition and option costs of mineral rights are capitalized upon acquisition. Mine development costs incurred to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. If we do not continue with exploration after the completion of the feasibility study, the mineral rights will be expensed at that time. Costs of abandoned projects are charged to mining costs including related property and equipment costs. To determine if these costs are in excess of their recoverable amount periodic evaluation of carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15,  Impairment or Disposal of Long-Lived Assets.
 
Share-based Payments
 
We determine the fair value of stock option awards granted to employees in accordance with FASB ASC Topic No. 718 – 10, “Share-Based Payments”) and to non-employees in accordance with FASB ASC Topic No. 505 – 50.
 
Fair Value of Equity Transactions
 
Many of or equity transactions require us to determine the fair value of an equity instrument in order to properly record the transaction in our financial statements. Fair value is generally determined by applying widely acceptable valuation models, (e.g., the Black Scholes and binomial lattice valuation models) using the trading price of the underlying instrument or by comparison to instruments with comparable maturities and terms.

Warrants

Warrants are recorded as liabilities at their estimated fair value at the date of issuance, with subsequent changes in estimated fair value recorded in other income (expense) in the Company’s statement of operations in each subsequent period. The warrants are measured at estimated fair value using a modified lattice model, which is based, in part, upon inputs for which there is little or no observable market data, requiring the Company to develop its own assumptions. Inherent in this model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. We estimate volatility at the date of issuance, and at each subsequent reporting period, based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on our historical rate, which we anticipate to remain at zero. The assumptions used in calculating the estimated fair value of the warrants represent our best estimates, however these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different.
 
 
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DESCRIPTION OF BUSINESS

Overview of Our Business
 
We are an emerging exploration company, focused on the discovery and development of lithium and potassium brine and nitrate and iodine deposits in Chile, Argentina and Peru.
 
 
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In May 2011, we acquired 60% ownership of six companies that collectively own the Maricunga project, which consists of mining concessions covering an area of approximately 3,553 acres (1,438 hectares), comprising six exploitation mining concessions in areas prospective for lithium (which is non-concessible) and potassium brines, and is located in the northeast section of the Salar de Maricunga in Region III of Atacama in northern Chile. See “Our Projects—Chile—Maricunga” below for more information.
 
 
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In September, 2011, POSCAN purchased 38,095,300 Units of our securities for approximately $8 million, with each “Unit” consisting of one share of our common stock and a three-year warrant to purchase one share of our common stock at an exercise price of $0.40.  POSCAN will purchase an additional 47,619,000 Units at the same $0.21 price per Unit (for an aggregate additional purchase price of approximately $10 million) upon satisfaction of certain conditions.  The agreement with POSCAN includes provision for POSCAN to purchase brine from the Maricunga property and test it at POSCAN’s test facility in Korea.  In addition, we and POSCAN will discuss and evaluate the development, financing and construction of a brine testing facility on the Maricunga property, and if such a facility is built, we would supply the test facility with brine and other materials and utilities and assist POSCAN in obtaining any rights, licenses and permits required to build and operate such facility. POSCO (with its subsidiaries) is a diversified company, with operations in energy, chemicals and materials and is one of the largest steel manufacturers in the world.  For a more complete description of these agreements, see “Our Projects—Chile—Maricunga—POSCO” below.
 
 
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In August 2010 we acquired 100% ownership of Alfredo Holdings, Ltd. (“Alfredo”), which, through its Chilean subsidiary, Pacific Road Mining Chile S.A. (“PRMC”), had an option to purchase mining concessions on approximately 6,670 acres (2,700 hectares) of mining tenements near Pozo Almonte, Chile (the “Alfredo Property”), from which we expected to produce saleable iodine and (aided by the potassium we expect to generate from our properties that are prospective for lithium) nitrate products.  That option has terminated as a result of our not making the required option payments.  We are not currently negotiating with the owners of the Alfredo Property to reacquire the option to purchase the Alfredo Property, and there can be no assurance that any new option will be executed. We are actively exploring opportunities to acquire other iodine/sodium nitrate prospects in addition to or in lieu of the Alfredo property; however, there can be no assurance that suitable prospects will be available on terms acceptable to us or that any such acquisition will be successfully completed.  See “Our Projects—Chile—Alfredo” below for more information.
 
 
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In July 2010 we acquired 100% ownership of Noto Energy S.A., an Argentinean corporation (“Noto”), which beneficially owns a 100% interest over 2,995 acres (1,212 hectares) situated on brine salars in Argentina, known as Cauchari.  We are in the process of evaluating the Noto property, but we currently do not anticipate spending material amounts on exploration work with respect to this project over the next 12 months. See “Our Projects—Argentina—Puna Lithium Corporation, Lacus Minerals S.A and Noto Energy S.A Transactions” below for more information.
 
 
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In February 2010, we acquired 100% of the assets of the Loriscota, Suches and Vizcachas projects located respectively in the Regions of Puno, Tacna and Moquegua, Peru. The assets consist of nine undeveloped mineral claims prospective for lithium and potassium covering a total area of 19,500 acres (7,890 hectares). We continue to evaluate these properties to determine if they meet our criteria, but we currently do not anticipate spending material amounts on exploration work with respect to these projects over the next 12 months. See “Our Projects—Peru” below for more information.
 
 
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We have determined that other properties we had acquired in Nevada and Argentina do not meet our integration and deposit criteria, and the options for these properties have been terminated.

Each of these acquisitions is described in more detail below.

Strategic Plan

Our strategic plan is to explore and develop our existing projects and to identify opportunities and generate new projects with near-term production potential, with the goal of becoming a company with valuable lithium or industrial minerals properties.  Our primary objective is to become a low cost lithium producer as well as a significant producer of potassium nitrate. The key to achieving this objective is to become an integrated chemical company through the strategic acquisition and development of lithium assets as well as other assets that have by-product synergies.

We recorded an impairment charge to Alfredo of $4,070,000 during the year ended June 30, 2011, due to termination of the option on the Alfredo Property as a result of our not having made required option payments.

We have acquired the Maricunga project, an advanced lithium and potassium chloride project in Chile, and we continue to explore other lithium and industrial minerals prospects in the region, located to complement the Alfredo project, which we intend to secure, in order to achieve integration of operations to produce metallurgical grade lithium, commercial grade fertilizer and pharmaceutical grade iodine.