Corporate Summary

Li3 Energy, Inc., (“Li3,” “Li3 Energy”, “the Company” “we,” “our” or “us”) was incorporated under the laws of the state of Nevada on June 24, 2005. We are an exploration company in the lithium and potassium mining sector, based in South America. Our common stock is currently quoted on the OTCQB. We aim to acquire and develop a unique portfolio of lithium and potassium brine projects in the Americas. We are focused on further exploring, developing and commercializing our 49% interest in the Maricunga Project (as defined below), located in the northeast section of the Salar de Maricunga in Region III of Atacama in northern Chile, as well as increasing our portfolio of projects.

The “Maricunga Project” refers to a lithium and potassium exploration project consisting of two adjacent properties covering an aggregate of 1,888 hectares: a 60% interest in Sociedades Legales Mineras Litio 1 a 6 de la Sierra Hoyada de Maricunga (“SLM Litio 1-6”), and a 100% interest in a group of exploitation mining concessions named Cocina 19 through 27 (the “Cocina Mining Concessions”). To the best of our knowledge, the Maricunga Project is the only advanced exploration stage lithium and potassium project within the Salar de Maricunga, the second largest lithium-bearing salt brine deposit in Chile. We plan to continue exploring other synergistic opportunities to further augment and strengthen this property and our land portfolio throughout the region. We are seeking to be a low cost producer of lithium, potash and other mineral products.

Our goals are to: a) advance our portfolio of projects to the feasibility study stage; b) support the global implementation of clean and green energy initiatives; c) meet growing lithium market demands; and d) become a mid-tier, low cost secondary supplier of lithium, potassium, and other strategic minerals, serving global clients in the energy, fertilizer and specialty chemical industries.

All of our mineral rights in the Maricunga Project are currently held by Minera Li Energy SpA (“Minera Li”), of which the Company holds a 49% ownership interest. The controlling interest in Minera Li (51%) is held by a private Chilean company, Minera Salar Blanco SpA (“MSB”, previously BBL SpA). Pursuant to our Shareholders Agreement with MSB, MSB has agreed to provide funding for our share of the development of the Maricunga Project until construction permits are in place.

On July 20, 2016, MSB entered into an agreement in principle with Lithium Power International Limited (“LPI”), an Australian company, regarding a joint venture to explore and develop the Maricunga Project in accordance with a term sheet dated July 14, 2016. On August 30, 2016, Li3 entered into an agreement with MSB, pursuant to which, Li3 and MSB, as the current shareholders of Minera Li, agreed to proceed with the transactions contemplated by the term sheet (the “Transaction”), resulting in a restructuring of the parties respective positions in the Maricunga project.

As part of the Transaction, Mineral Li and MSB agreed to contribute their Maricunga lithium brine assets to a new joint venture (the “Maricunga JV”) and LPI agreed to contribute $27.5 million in cash to the Maricunga JV to cover exploration and development costs for the next 2.5 years until the completion of a definitive feasibility study in late 2018. Following the completion of the Transaction, Li3 will own a direct 17.67% equity interest of the Maricunga JV, with LPI and MSB owning 50.0% and 32.33%, respectively. Li3 will be entitled to appoint one director of the Maricunga JV (so long as it holds at least 10% of the equity interests of the joint venture), with LPI and MSB holding three and two director seats, respectively. The ownership interest of parties in the Maricunga JV are outlined in the following graphic:

On September 7, 2016, the Maricunga JV entity, Minera Salar Blanco SA (“MSB SA”), a Chilean company, was incorporated and Minera Li has transferred all of its Maricunga Project assets to MSB SA as consideration for 36.05% of the shares in MSB SA. MSB also transferred its 36% interest in SLM Litio 1-6, resulting in MSB SA owning 96% of SLM Litio 1-6 and 100% of the Cocina Mining concessions. The remaining 4% interest in SLM Litio 1-6 is held by private individuals in Chile. MSB and LPI also contributed several adjacent properties owned by them to MSB SA, which are also included in the Maricunga Project. MSB and LPI currently hold 13.95% and 50%, respectively, of the shares in MSB SA. Following the planned dissolution of Minera Li, Li3 will receive 49% share of Minera Li’s shares in MSB SA (being 17.67%), with MSB receiving 51%.

In Chile, the Chilean Organic Law on Mining Concessions (“LOCM”) and the Chilean Mining Code (“CMC”) provide that lithium may not be granted in a mining concession initiated after January 1, 1979. As a result, only mining exploitation concessions initiated before January 1, 1979 are authorized for the exploitation of lithium. For all other cases, the CMC establishes the reserve of lithium to 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 Chile for each case. As a result, Minera Li is currently authorised to exploit lithium from the Cocina Mining Concessions but not from SLM Litio 1-6.

However, in June 2014, Chile´s President and Minister of Mining signed a decree for the establishment of the National Lithium Commission, with the objective of recommending a new state policy for the exploitation of lithium and promotion and development of new projects in Chile. In January 2015, the National Lithium Commission issued its report and, as a result, the Chilean government is to consider working alongside companies from the private sector to develop the country's lithium reserves, increase production and secure the long-term sustainability of Chile's lithium industry. Since then, the Chilean government has continued to announce upcoming changes to the legislation in favor of advancing new lithium projects. We believe this is a positive step forward in Minera Li´s continued efforts of seeking a permit to exploit lithium from SLM Litio 1-6. Minera Li continues to seek a permit for SLM Litio 1-6, however, if no permit for lithium exploitation is acquired, Minera Li plans to develop and exploit potassium from this property.

Through our strategic partner, POSCO Canada, Ltd. (“POSCAN”), a wholly-owned subsidiary of POSCO (NYSE: PKX), we have been evaluating the use of advanced process technologies that may further improve upon the economics and shorten the commercial production timeline of Minera Li´s Maricunga Project, of which we retained a 49% interest. These technologies have been evaluated by POSCO in a pilot test facility, proving effective when measured against the conventional lithium and potassium commercialization process.

According to the signumBOX Performance Index published in August 2016, SLM Litio 1-6 is ranked as the seventh best undeveloped lithium project in the world out of 22 other brine salars, subject to obtaining lithium exploitation permits. SLM Litio 1-6 is the highest ranked undeveloped lithium brine project in Chile and after Atacama, the Salar de Maricunga has the second highest quality deposit of lithium in Chile.

Since May 2011, our key activities were as follows:

During January 2014, the Company executed an agreement with MSB pursuant to which MSB acquired 51% of Minera Li, with Li3 retaining 49% ownership. In September 2016, the Maricunga JV was established and Minera Li has transferred all of its Maricunga Project assets to the Maricunga JV entity, MSB SA, as consideration for 36.05% of the shares in MSB SA, providing Li3 with a 17.67% interest in the Maricunga Project.

During the year ended June 30, 2016, work was undertaken on a preliminary work program for the Maricunga Project to expand the work performed on SLM Litio 1-6 to include additional studies of the Cocina Mining Concessions and the extent of the whole salar. The works undertaken included preparation of a new exploration plan and relevant approvals, preparation and permitting of a new environmental impact declaration, geophysical surveys, initiation of baseline monitoring programs and pumping test program on existing production wells. The results of the testing are expected during the last quarter of 2016. Additionally, a new exploration program is expected to commence before the end of 2016.

On January 29, 2016, the Company executed a non-binding letter of intent with Wealth Minerals Ltd for a transaction between the companies. This transaction is currently under review by the Company.

We believe that if the Maricunga JV is successful in advancing the Maricunga Project through the exploration and feasibility study stage, obtains the necessary Chilean government approvals/licenses, closes and acquires additional land acreage to support further development of the Maricunga Project, achieves a definitive feasibility study, and raises the necessary capital, the Maricunga JV could begin commercial production and generate revenues within the next 5-7 years. However, there can be no assurance that the Maricunga JV will achieve these stated objectives.

We are led by a management team with extensive exploration, mining, minerals, finance and commercialization expertise, and a Board of Directors who have advised, led and operated numerous mining entities. They are supported by an experienced technical team, many of whom have worked on other junior lithium projects. Our management team is closely involved in advising on the development of the Maricunga Project.

We have never generated revenues from operations and currently do not expect to generate any such revenues in the near term.

Strategic Plan

Our objective is to become an integrated chemical company through the strategic acquisition and development of lithium and potassium assets, as well as other assets that have by-product synergies. Part of our strategic plan is to ensure Minera Li explores and develops the existing Maricunga Project while we simultaneously identify other synergistic opportunities with new projects with production potential that could also be advanced in an accelerated manner. Our goal is to become a company with valuable lithium, potassium and other industrial minerals properties. Our primary objective is to become a low cost lithium and potash producer utilizing improved technologies for the extraction of lithium and potash from brines.

Some of the actions we have taken in striving to achieve our objective are as follows:

Advancement of the Existing Maricunga Project

Along with our Maricunga JV partners, we are fully committed to advancing the Maricunga Project., LPI will contribute $27.5 million in cash to the Maricunga JV to cover exploration and development costs for the next 2.5 years until the completion of a definitive feasibility study in late 2018.

The Company continues to pursue joint venture opportunities within the Salar de Maricunga and MSB has also acquired options to buy additional mining properties with the Salar in order to consolidate its property holdings within the Salar de Maricunga. We continue to negotiate with the Chilean government regarding permitting for exploitation of lithium and have taken part in the discussions with the National Lithium Commission for a joint effort between the state and private companies to develop a lithium project within Chile.

In March 2013, POSCO announced that it had developed a chemical lithium extraction technology that reduces recovery time from around 12 months to less than a few days. Testing of this technology performed by POSCO on brine extracted from the SLM Litio 1-6 concessions of the Maricunga Project, showed that it increases the lithium recovery rate from a maximum of 50% using traditional evaporation ponds to more than 80%, and the lithium carbonate produced is more than 99.9% pure. The Maricunga JV plans to assess the use of POSCO’s technology to gain efficiencies in exploiting lithium from the Maricunga Project, however, there is no agreement in place with POSCO regarding the use of its technology by the Maricunga JV or any of its participants

In January 2015, initial test results from POSCO´s demonstration plant located in the Cauchari-Olaroz salar in Argentina , in which Li3 has no interest, indicated that the direct lithium extraction process achieved or exceeded all performance targets and that the lithium products subsequently processed were of very high quality. During a one month period, over 20 tonnes of lithium phosphate was produced from the demonstration plant and subsequently exported to POSCO’s facility in Pohang, Korea where it was further processed into battery grade lithium carbonate and lithium hydroxide.

Identifying other opportunities with new projects

The current market environment is showing attractive valuations for advanced lithium projects, and due to our execution of the Maricunga Project and our regional/market knowledge, we believe that we are uniquely positioned to identify and execute certain new opportunities. We have been actively reviewing opportunities with low-cost, high quality deposits in an advanced exploration stage that are located mainly in Chile, Argentina and North America.

Strategic Partners

MSB

MSB is a Chilean private company which was formed in 2013 to explore and develop the Maricunga Salar. It is controlled by Chilean businessman Martin Borda, who is involved in a wide range of industries including the automotive, aquaculture and food sectors.

On January 27, 2014, the Company entered into a sale agreement with MSB, pursuant to which MSB acquired from the Company eleven of its sixty shares of Minera Li (the “Share Purchase”) for a cash payment of $1,500,000. In connection with the Share Purchase, Minera Li held a shareholders’ meeting, pursuant to which Minera Li issued forty additional shares to MSB in exchange for a cash payment of $5,500,000 (together with the Share Purchase, the “MSB Transaction”). As a result of the MSB Transaction, MSB became the majority shareholder of Minera Li holding 51% ownership, with the Company retaining a 49% interest.

Concurrent with the execution of the MSB Transaction, the Company and MSB also entered into a Shareholders Agreement regarding their joint ownership of Minera Li (the “Shareholders Agreement”). Under the Shareholders Agreement, MSB agreed to pay $1,000,000 (the “Additional Payment”) to the Company upon the earlier of (i) its completion of certain project milestones relating to the permitting and development of the Maricunga Project, and (ii) January 27, 2016.

MSB agreed to finance the Company’s exploration and development expenses until the Maricunga Project reaches full permitting and is ready for construction, by providing loans due 24 months from receipt at an interest rate of 12% per annum and secured by the Company’s ownership interest in Minera Li. Specific limits for these loans were to be negotiated in good faith between MSB and the Company. As of June 30, 2016, the Company has not received any such loans.

MSB also provided the Company with a credit facility of $1,800,000 for working capital, pursuant to which $1,220,000 were provided to the Company by MSB. The loans were due for repayment 18 months from each drawdown date at an interest rate of 8.5%, and the Company pledged 13 of its shares in Minera Li as security for the loans.

On January 19, 2016, the Company entered into an additional agreement with MSB whereby the Company and MSB agreed to offset the $1,000,000 Additional Payment MSB previously agreed to provide to the Company against $1,000,000 of the Company’s notes payable to MSB and $134,901 of accrued interest owed to MSB was rolled into the Company’s existing note payable. In addition, MSB loaned an additional $100,000 to the Company and MSB waived the 13 shares in Minera Li which were pledged by the Company to MSB as security for its notes payable. The resulting $454,901 loan payable is due on January 18, 2018, bears interest at 8.5% per annum, and is secured by 5 of the Company’s shares in Minera Li.

In accordance with the Shareholders Agreement, the board of directors of Minera Li consists of three representatives from MSB and two representatives from Li3, including Li3´s Chairman and CEO. Although financial control of Minera Li lies with MSB, MSB is reliant on Li3´s expertise in the mining and lithium sectors. As such, the technical team previously responsible for the Maricunga Project remains deeply involved in its current development plans and continues to be supervised by Li3´s management and board participants.

POSCO / POSCAN

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. It is publicly-listed on the NYSE and POSCO’s management possesses executive leadership, a world renowned Global Research and Development Center (RIST), a vast knowledge of lithium and other strategic minerals, and a vision to transform the methodology in how lithium is commercialized. We believe that POSCO demonstrates a unique ability to apply both intellectual and financial capital, and that a strategic partnership with POSCO would enable the Company to begin to execute its strategic plan.

On August 24, 2011, we entered into a Securities Purchase Agreement (the “SPA”) and an Investor Rights Agreement (the “IRA” and, together with the SPA, the “POSCAN Agreements”) with POSCAN pursuant to which POSCAN acquired 100,595,238 units of the Company for approximately $18 million, with each unit consisting of one share of common stock and one three-year warrant, each warrant enabling the holder to purchase one share of the Company’s common stock at an exercise price of $0.21 per share. Li3 also agreed to issue POSCAN a two-year warrant to purchase 5,000,000 shares of common stock at an exercise price of $0.15 per share (together with the warrants underlying the units, the POSCAN Warrants). All POSCAN Warrants have expired unexercised and, as of the date of this filing, shares of the Company’s common stock held by POSCAN represent 20.3% of our common stock currently issued and outstanding.

The IRA provides that Li3 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 common stock. Mr. Gi-Chen Eom is currently the POSCAN-designee on the Company’s board of directors.

In March 2013, POSCO announced that it had successfully completed testing of its proprietary, patented Direct Lithium Extraction Process. This process addresses the current economics and inefficiencies in the lithium market by significantly improving lithium recovery yields and shortening the time to commercial production. According to POSCO, this process includes the following benefits:

In January 2015, initial test results from POSCO´s demonstration plant located in the Cauchari-Olaroz salar in Argentina (in which Li3 has no interest) indicated that the Direct Lithium Extraction Process achieved or exceeded all performance targets and that the lithium products subsequently processed were of very high quality. During a one month period, over 20 tonnes of lithium phosphate was produced from the demonstration plant and subsequently exported to POSCO’s facility in Pohang, Korea where it was further processed into battery grade lithium carbonate and lithium hydroxide.

There can be no assurance that any 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.

Project Overview

Maricunga Project

As of June 30, 2016, we retained a 49% interest in the Maricunga Project. As at the date of this Form 10-K/A, our interest has been reduced to 17.67% as a result of the Maricunga JV with Lithium Power International Limited. The Maricunga Project consists of approximately 1,888 hectares, and is located in the northeast section of the Salar de Maricunga, the second largest lithium-bearing salt brine deposit in Chile. It consists of Minera Li´s 60% controlling interest in SLM Litio 1-6 (1,438 hectares - highlighted in blue on the map below) and the Cocina Mining Concessions (450 hectares - highlighted in green on the map below).

Location

The Salar de Maricunga is located in Region III (Atacama region) of northern Chile at an elevation of approximately 3,750m. It is classified as a mixed type of salar of the Na-Cl-Ca/SO4 system. It is located about 180km to the north-east of Copiapo, the capital of the Atacama region, via “Carreteradel Inca” highway. As the properties are both undeveloped, at this stage there is no source of power or material plant and equipment located on the properties. Local infrastructure at the Salar de Maricunga includes National Highway 31 and an electrical power line running parallel to the highway.

Location of the Salar de Maricunga

Maricunga Project within the Salar

The area of each mining concession is:

SLM Litio 1-6

On May 20, 2011, Minera Li acquired 60% of SLM Litio 1-6, comprising six exploitation mining concessions granted by the Chilean government, each held by one of a group of six private companies (the “Maricunga Companies”) as follows:

The purchase price was $6,370,000 in cash, including amounts paid to agents, and 127,500,000 restricted shares of our common stock. Each mining concession grants the owner the right to explore and commercially develop any mineral deposits located at SLM Litio 1-6, with the exception of lithium. SLM Litio 1-6 were constituted subsequent to the 1979 Lithium Exploitation Restrictions. Consequently, under the current Chilean state policy, their holder is not authorized to exploit lithium in the area covered by those concessions. In June 2014, Chile´s President and Minister of Mining signed a decree for the establishment of the National Lithium Commission, with the objective of recommending a new state policy for the exploitation of lithium and promotion and development of new projects in Chile. In January 2015, the National Lithium Commission issued its report and, as a result, the Chilean government is to consider working alongside private companies in the lithium sector to develop the country's lithium reserves, increase production and secure the long term sustainability of Chile's lithium industry.

SLM Litio 1-6 are not subject to royalties or other agreements. However, Minera Li must pay annual licenses in March of each year, aggregating approximately $15,000 per year for exploration and exploitation concessions.

Cocina Mining Concessions

On April 16, 2013, Minera Li acquired the Cocina Mining Concessions for $6.6 million. The Cocina Mining Concessions were constituted prior to the 1979 Lithium Exploitation Restrictions. Consequently, their holder has a constitutionally protected ownership right to exploit lithium in the area covered by those concessions. All requisite permits must be obtained prior to receipt of authorization for exploitation. Refer to the section ‘Lithium Exploitation Permitting in Chile’ below for more details about the rights to exploit lithium in Chile.

Geology

The Maricunga basin comprises a large drainage basin with an area of approximating 2,200 km2. It is structurally controlled to the west by mountains which have been raised by inverse faults that expose a basement sequence ranging in age from Upper Paleozoic to Lower Tertiary. To the southeast, the basin limit coincides with the Chilean-Argentine frontier, which is defined by a line of volcanic complexes with elevations up to 6,749 m (Nevada Tres Cruces) and a range of ages between 26 Ma and 6 Ma. Some of the volcanic complexes are associated with the characteristically auriferous mineralization of the Maricunga Belt. The eastern limit of the basin is marked by the Cordillera Claudio Gay, a North-South trending mountain chain resting on a basement of Middle to Upper Paleozoic rocks and exposing deformed volcanoclastic sequences of Upper Oligocene to Lower Miocene rocks which represent remnants of the volcanic arc preserved on the margins of the Maricunga basin.

The Salar de Maricunga is located in the northern part of the Maricunga basin and covers some 140 km2. The Salar is surrounded by alluvial deposits on the north, east and south, and by volcanic deposits on the west. Salar de Maricunga is classified as a mixed type salar of the Na-Cl-Ca/SO4 system. The brines from Maricunga are solutions saturated in sodium chloride with total dissolved solids (TDS) of 26% (316 g/L) as an average, although in most areas exceeding 27%. The average density is 1.200 g/cm3. The lithium content in the brine typically exceeds 1,200 mg/L. The other components present in these brines, which constitute an aqueous complex system and exist also in other natural brines in Argentina, Bolivia and Chile are the following: K, Li, Mg, Ca, SO4, HCO3 and B, which below pH 7 exists predominantly as un-dissociated H3BO3. Interesting values of strontium (mean of 290 mg/L) also have been detected by ICP analysis in the Maricunga brine.

The Salar itself is in-filled with alternating sequences of evaporates and clastic sediments. The salar exhibits a typical halo structure for a semi-mature salar with clastic sediments on the periphery, transitioning to a halite nucleus. As is typical for such mixed-type salars, clastic sediments underlie and interbed with the halite. Results of drilling carried out on the SLM Litio 1-6 tenements indicate the presence of an upper mixed halite sequence that consists of highly fractured-to-massive halite beds and halite mixed with clay and silt-sized sediments with a combined thickness from 3 m to 66 m. This upper zone is underlain by a sequence of silt and clays that are inter-bedded with coarser grained sands, gravels, conglomerates, and volcanic ashes. 

Exploration Work Performed

In December 2011, we effected a timely completion of the $8 million Phase One of our Exploration and Development Program, on the SLM Litio 1-6 concessions. We reported the initial results from brine samples taken during the sonic and reverse circulation well drilling program that was initiated in October 2011.

Exploration work conducted on the property in 2011 consisted of the following:

The objectives of the 2011 drilling campaign were to carry out drilling on a specified grid to allow the estimation of measured “in-situ” brine resources over the SLM Litio 1-6 concessions in the Salar de Maricunga. The drilling method selected was based on the need to allow for the collection of continuous core from which “undisturbed” samples at specified depth intervals could be prepared for laboratory porosity analyses and for the collection of depth-representative brine samples at specified depth intervals without possibility of contamination by drilling fluids.

Six sonic boreholes were completed to a depth of 150 m. Undisturbed samples were collected from the sonic core at three meter intervals for porosity analyses (318 samples). Brine samples were collected during the sonic drilling at three meter intervals for chemistry analyses (431 primary main samples and 192 QA/QC samples). All sonic boreholes were completed as observation wells on completion of drilling.

A total of 915 m of exploration RC drilling was carried out for the collection of chip samples for geologic logging, brine samples for chemistry analyses and airlift data to assess relative aquifer permeability. The RC boreholes were completed as observation wells for use during future pumping tests. Two test production wells were installed to a total depth of 150 m each for future pumping trials.

A seismic tomography survey was carried out (23-line km) to help define basin lithology and basin geometry. Six test trenches were completed to a depth of 3 m to carry out shallow pumping trials. 24-hour pumping tests were carried out in each trench.

Evaporation test work was initiated on the Maricunga brine at the University of Antofagasta to evaluate the suitability of conventional brine processing techniques. Test work was also initiated by Li3’s strategic partners to evaluate the application of proprietary technology on the recovery of lithium. This test work continued throughout 2012 and 2013 until sufficient test results were collected. Testing of this technology performed by POSCO on brine extracted from the SLM Litio 1-6 concessions of the Maricunga Project, showed that it increases the lithium recovery rate from a maximum of 50% using traditional evaporation ponds to more than 80%, and the lithium carbonate produced is more than 99.9% pure. The Maricunga JV plans to assess the use of this technology to gain efficiencies in exploiting lithium from the Maricunga Project, however there is currently no agreements in place with POSCO regarding the use of this technology by the Maricunga JV or its participants . Meanwhile, test work completed to date indicates that conventional solar evaporation methods will be suitable for brine concentration on the Maricunga Project.

The assay results from the 2011 exploration program were as follows:

In May 2012, we reported the completion of a technical report on SLM Litio 1-6 prepared by Donald H. Hains, Principal of Hains Technology and Associates. The technical report demonstrates that SLM Litio 1-6 has high grades of lithium and potassium and recommended the project to advance to the feasibility study stage. The report included the following conclusions and recommendations:

In March 2013, we received approval of the environmental impact declaration for SLM Litio 1-6 from the Chilean Environmental Authority.

Exploration work conducted across the SLm Litio 1-6 and Cocina mining concession and the larger salar de Maricunga area in 2015 consisted of:

On July 20, 2016, MSB entered into a binding and exclusive agreement with Lithium Power International Limited (“LPI”), an Australian company, regarding a joint venture to explore and develop the Maricunga Project in accordance with a term sheet dated July 14, 2016. On August 30, 2016, the Company entered into an agreement with MSB, pursuant to which, the Company and MSB, as the current shareholders of Minera Li, unanimously agreed to approve the transactions contemplated by the term sheet (the “Transaction”).

As part of the Transaction, Minera Li and MSB agreed to contribute their Maricunga lithium brine assets to the Maricunga JV and LPI agreed to contribute $27.5 million in cash to the Maricunga JV to cover exploration and development costs for the next 2.5 years until the completion of a definitive feasibility study in late 2018. Following the completion of the Transaction, Li3 will own a direct 17.67% equity interest of the Maricunga JV, with LPI and MSB owning 50.0% and 32.33%, respectively. Li3 will be entitled to appoint one director of the Maricunga JV (so long as it holds at least 10% of the equity interests of the joint venture), with LPI and MSB holding three and two director seats, respectively. The ownership interest of parties in the Maricunga JV are outlined in the following graphic:

On September 7, 2016, the Maricunga JV entity, Minera Salar Blanco SA (“MSB SA”), a Chilean company, was incorporated and Minera Li has transferred all of its Maricunga Project assets to MSB SA as consideration for 36.05% of the shares in MSB SA. MSB also transferred its 36% interest in SLM Litio 1-6, resulting in MSB SA owning 96% of SLM Litio 1-6 and 100% of the Cocina Mining concessions. The remaining 4% interest in SLM Litio 1-6 is held by private individuals in Chile. MSB and LPI also contributed several adjacent properties owned by them to MSB SA, which are also included in the Maricunga Project. LPI and MSB currently hold 13.95% and 50%, respectively, of the shares in MSB SA. Following the planned dissolution of Minera Li, Li3 will receive 49% share of Minera Li’s shares in MSB SA (being 17.67%), with MSB receiving 51%.

Maricunga Project Quality Assurance Program

Sampling and sample preparation protocols for the Sonic Drilling and Reverse Circulation (RC) Drilling Programs were developed by Don Hains, Professional Geologist ("P.Geo"), Frits Reidel, Certified Professional Geologist ("CPG,") and Pedro Pavlovic, Chemical Engineer. All protocols were implemented at the start-up of the drilling programs in October 2011 under the supervision of Frits Reidel, CPG and included extensive day to day training and supervision of Li3 field staff and experienced MWH hydrogeologists and field technicians. Frits Reidel, CPG was present throughout the drilling program on regular intervals to review the day to day execution of these protocols.

A full QA/QC program for monitoring accuracy, precision and potential contamination of the entire brine sampling and analytical process was implemented. Accuracy, the closeness of measurements to the “true” or accepted value, was monitored by the insertion of standards, or reference samples, and by check analysis at an independent (or umpire) laboratory.

Precision of the sampling and analytical program, which is the ability to consistently reproduce a measurement in similar conditions, was monitored by submitting blind field duplicates to the primary laboratory. Contamination, the transference of material from one sample to another, was measured by inserting blank samples into the sample stream at site. Blanks were barren samples on which the presence of the main elements undergoing analysis has been confirmed to be below the detection limit.

Approximately 31% of the 623 samples submitted for chemical analysis were quality control samples. The QA/QC procedures adopted for the Maricunga Project are discussed below, and included the following:

Three standards (A, B and C), or reference samples, were inserted at a frequency of 1 in 15 samples (1/3 of each type of standard, randomly inserted). The specially prepared samples were submitted to five laboratories as a Round Robin (each analyzing five 1-L sub-samples from each type of standard) to establish an accepted mean and standard deviations for the analytical variables.

The University of Antofagasta made an internal check on overall analytical accuracy for the primary constituents of the brine by using ion balance. This calculation was checked and also the ratio of measured to calculated TDS was added as another procedure for checking the correctness of analyses.

Duplicate samples at a frequency of 1 in 10 samples in the analysis chain were submitted to the University of Antofagasta as unique samples (blind duplicates) to monitor precision.

Stable blank samples (distilled water) were inserted at a frequency of 1 in 30 samples to measure cross contamination.

Duplicates at a frequency of 1 in 10 samples, and including blind control samples (a total of 70 samples), were submitted to the secondary laboratory (Alex Stewart in Mendoza) as check samples (external duplicates).

Development Plan for the Maricunga JV Project

The following table outlines the anticipated development timetable, pending development phases and the corresponding anticipated budgets for the Maricunga project. The work program will be funded by Lithium Power International for the next $15 million required, pursuant to their obligation to provide funding in that remaining amount in order to earn their 50% interest in the project. Minera Salar Blanco SpA will continue to serve as operator of the Maricunga project and is charged with executing the work program on behalf of the Maricunga JV. The work program will be supervised by Mr Frits Reidel, M. Sc., CPG, of FloSolutions S.A.C. Mr. Reidel is hydrogeologist with 29 years of working experience on water and infrastructure related projects in the Americas. His extensive experience in the evaluation of brine resources includes involvement with the initial resource evaluation and feasibility of Salar de Hombre Muerto (FMC Lithium) during 1992-1993, membership on the Technical Committee of Lithium Americas Corp for the exploration and brine resource evaluation of Salar de Cauchari during 2009-2010; and participation in the resource evaluation for the Feasibility Study of Salar de Olaroz (Orocobre Ltd.) in 2010-2011. He has served as Qualified Person on the Salar de Maricunga Lithium Project for Li3 Energy and Minera Salar Blanco since 2011 and on the Sal de los Angeles Project for LiX Energy since 2016. Mr. Reidel is a Qualified Person as defined under Canadian National Instrument 43-101 (Standards of Disclosure for Mineral Projects). He is a partner of Flo Solutions and acts as General Manager for Flo Solutions' Chile operations.

MSB initiated a phased work program in August 2016 to complete the Project’s definitive feasibility study and and environmental impact assessment. The first phase of this program consisted of a brine resource evaluation including exploration drilling and well testing focused on the Cocina, San Francisc, Salamina and Despreciada mining claims as follows:

Subsequent to the period, during the spring of 2017, initial results of testing completed during the work program were received, and on July 12, 2017, MSB and LBI published a Joint Ore Reserves Committee (“JORC”) resource estimate based on the exploration results As at the date of this Annual Report on Form 10-K/A, Li3 is evaluating the results of the JORC resource estimate.

Regulation of Mining in Chile

Regulatory Framework

The regulatory framework governing the exploration and extraction of mineral resources in Chile consists of the following key legislation:

The Regulation on the System of Environmental Impact Assessment and some provisions of the Water Code, Health Code and Labour Code are also applicable to mining operations.

Regulatory Authorities

The main authority responsible for the regulation of mining activities in Chile is the National Geology and Mining Service (Servicio Nacional de Geología y Minería), which serves as an adviser to the Ministry of Mining on geology and mining issues. Some of its duties are to keep a record of mining concessions granted and to supervise compliance with the Mining Code Regulations, among others. Other public entities involved in the regulation of mining operations include the Environmental Assessment Service and the Superintendence of Environmental Affairs.

Ownership of Mining Concessions

The state has absolute, exclusive and inalienable rights over all mines, which cannot be taken away by prescription or lapse of time (Mining Code). This is regardless of any claim by natural or legal persons over lands within which mines are located. However, a person (natural and/or legal) can obtain exploration and exploitation mining concessions, regardless of who owns the land.

This means that there is an absolute distinction between the ownership of surface land and ownership of the mining concession granted within the same piece of land. As a result, the land owner and the mining concession owner can co-exist if they are different persons. Mining law stipulates that land ownership is subject to the obligations and limitations established by law to facilitate mining exploration and exploitation as well as mineral processing via, for example, mining easements.

Chilean Mining Leases, Licenses and Concessions

As in most jurisdictions, a mining concession in Chile is a right against all persons, which is different to and independent from the ownership of the surface land, even if both rights belong to the same person, and as such is enforceable against the state and all persons (Article 2, Mining Code). Mining law also prescribes that surface property is subject to the obligations and limitations established by law to facilitate mining exploration, exploitation and mineral processing.

Chilean mining legislation allows two types of mining concessions:

In general, both types of mining concession can be subject to any type of contract, such as a mortgage, lease agreement or purchase and sale agreement.

Exploration concessions last for two years from the date of grant, although they can be renewed for another two years. Exploitation concessions do not expire, provided that the right holder pays applicable annual taxes. If the holder fails to pay these taxes, the concession is auctioned off.

Concession Fees

An application fee must be paid after the filing of a request for a mining concession, and its amount depends on whether it is an exploration or an exploitation concession, as well as on the area it covers (measured in hectares).

The payment unit is calculated on 1/100 of a Monthly Tax Unit (MTU), a Chilean inflation-linked currency (1 MTU is about US$80), and the rate is applied through a progressive tax system.

For instance, the application fee for an exploration concession of over 3,000 hectares is 4/100 MTU per hectare, while the application fee for an exploitation concession of over 600 hectares is 5/100 per hectare.

In addition, after the mining concession is granted, the titleholder must pay an annual licence fee of 1/50 MTU per hectare for an exploration concession and 1/10 MTU per hectare for an exploitation concession. However, if the mining exploitation concession relates to non-metallic substances, the amount payable is 1/30 MTU per hectare.

Concession holders are not liable to third parties for non-payment of their licence fee.

Concession Restrictions

The general principle under Chilean mining law is that all metallic and non-metallic substances can be the object of a mining concession, in whatever form they may be naturally found. However, there are certain mineral substances that are reserved only to the owner of the surface land, such as surface clays. Concessions cannot be granted in relation to hydrocarbons (either liquids or gases), lithium, underwater deposits and mineral deposits of any kind located wholly or partially within areas defined by law as relevant for national security.

The Mining Law prohibits the overlap of mining concessions owned by different titleholders. It sets out different mechanisms and procedures to protect the preference of the first applicant and annul or cancel mining concessions requested or granted after that.

Finally, there are some legal restrictions regarding foreign ownership of lands located in border areas. However, Chile has signed a Mining Integration and Complementation Treaty with the Republic of Argentina.

How are leases, licenses or concessions awarded?

Mining concessions are granted by a judicial resolution issued at a non-contentious proceeding.

Applications for exploitation and exploration concessions begin with a request filed by any person interested in undertaking a mining activity before the court in whose jurisdiction the concession will be located, providing the exact geographical location of the area to be explored or exploited. Requests must be registered in the Registry of Mining and published in the Mining Gazette, and the applicant must then pay the application fees. After this, the file is sent to the National Geology and Mining Service for it to issue a report either in favour or against the grant of the mining concession. If the report is favourable, the court grants the concession by a final judgement that must also be registered in the Registry of Mining and published in the Mining Gazette.

If the above procedure is not complied with, the concession may be subject to cancellation at the request of any third parties who notice omissions or illegalities in the procedure.

Environmental Protection Requirements

Generally, the environmental protection measures that mining companies must adopt depend on the environmental components that may be affected by the mine's operation, such as water resources that might be polluted by mining waste, or communities settled nearby that could be affected in any way by the operations. Prior to exploration or exploitation of any concession, we must prepare and present an impact study to the environmental evaluation service (Servicio de Evaluacion Ambiental or “SEA”), which, after a detailed process of review and revision, may issue a resolution of environmental qualification (Resolucion de Calificacion Ambiental or “RCA”). This document is required for any mining project.

With regards to mining waste, the most important issues are the location and construction of the waste dump and the functioning and maintenance of tailings dams.

The Health Code requires the prior approval of the National Health Service for the construction of a waste-treatment plant of any kind. The Mining Safety Regulation requires that the stability of waste dump projects be guaranteed and that the highest safety measures are adhered to with regards to their construction and expansion. Such projects must be reviewed and approved by the National Mining and Geology Service.

There is a specific regulation on the construction and operation of tailings dams, Supreme Decree No 248/2007, which establishes procedures for the approval of tailings dams projects and requirements for their design, construction, operation and closing that guarantee the safety of people and assets.

Health and safety requirements

All health and safety regulations related to mining activity are contained in the Mining Safety Regulations, although there are some provisions of the Labour Code and Health Code that are also binding, as well as specific regulations in other Chilean legislation, such as that relating to tailings dams (see Question 6).

Some of the most important regulations on health and safety matters concern:

Foreign ownership restrictions

Chilean legislation does not restrict foreign investment and ownership of mining concessions in any way. On the contrary, foreign investment is encouraged and welcomed.

Under the Foreign Investment Statute (Decree Law No 600) and Chapter XIV of the Foreign Exchange Regulations of the Chilean Central Bank, a foreign investor and the Chilean state must sign a foreign investment contract that sets out the parties' rights and obligations. The investor's obligations include bringing the investment capital into the country within a specified amount of time and in a previously determined form. The state guarantees that the investor will not be discriminated against in economic matters, among others.

Taxes and Royalties

Apart from the application fees and annual license fees that interest holders must pay, Chilean taxation law recognizes three types of miners, which are subject to different tax regimes:

In addition, interest holders must pay a royalty calculated on the basis of production and sales levels. For instance, copper mining producers whose sales are less than 12,000 metric tons of copper per year are exempt from payment of the royalty, while mining producers whose sales levels are between 12,000 and 50,000 metric tons of copper per year pay between 0.5% and 4.5% of their operational taxable income.

Import and Export Duties

All income derived from the importation and exportation of mineral resources is included in the general tax regime. There are no additional taxes or specific regulations regarding the import and export of mineral resources.

While the current plan for the Maricunga Project is to exploit lithium and potash from both SLM Litio 1-6 and the Cocina Mining Concessions, if no permit for lithium exploitation is obtained for SLM Litio 1-6, the Maricunga JV plans to produce lithium carbonate and potash from the Cocina Mining Concessions in conjunction with producing potash only from SLM Litio 1-6.

The majority of the past and current technical work performed on the project is applicable to the production of lithium and/or potassium. Potassium exploitation does not require special permits and it is exploitable via regular mining concessions, according to the CMC. Initial estimations suggest that a potash project may be economically feasible. However, there can be no assurance that the Maricunga JV will be able to obtain the permits necessary to exploit any minerals that it discovers in a timely manner, or at all.

Permitting and Regulation of the Maricunga Project Concessions

When the 1983 Chilean Mining Code was introduced to replace the Mining Code of 1932, lithium was considered a strategic metal, because of its potential application to power generation by nuclear fusion. Therefore the Mining Code established that lithium is "non-concessible", which means that no mining concessions can be granted for exploring or exploiting lithium, except in certain cases that are stated in the Code.

More specifically, the Mining Code and the Organic Constitutional Law on Mining Concessions provide that lithium may not be granted in a mining concession initiated after January 1, 1979. As a result, only mining exploitation concessions initiated before January 1, 1979 are authorized for the exploitation of lithium. For all other cases, the Mining Code establishes the reserve of lithium to 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 Chile for each case.

Additionally, Law 16,319, which created the Chilean Nuclear Energy Commission (the “NEC”), provides in its Article 8 that, for reasons of national interest, any act or contract in connection with lithium will require the previous authorization of NEC (or have NEC as a party thereto). Once any such authorization is granted to an applicant, NEC is not authorized to amend it or terminate it, nor the applicant to assign it, for reasons other than those set forth in the resolution granting it.

As a result of the above provisions, the Maricunga JV is currently only authorised to exploit lithium from the Cocina, San Francisco, Despreciada and Salamina Mining Concessions (collectively the “1932 Code Concessions”) but not from the SLM Litio 1-6 concessions. Because the constitution process of the 1932 Code Concessions was initiated before January 1, 1979, lithium exploitation is authorized in the area covered by the 1932 Code Concessions. However, because the constitution process of SLM Litio 1-6 was initiated in 2000, lithium exploitation is not authorized in the area covered by such concessions. All other minerals on the SLM Litio 1-6, San Francisco, Despreciada and Salamina properties are concessible, assuming all requisite permits are obtained.

Legislative and Regulatory Developments Relevant to the SLM Litio 1-6 Concession

In June 2012, the Ministry of Mining established its first ever auction for the award of lithium production quotas and licenses (Special Lithium Operations Contracts, or “CEOL”) which would permit the exploitation of an aggregate of 100,000 tons of lithium metal (approximately 530,000 tons of lithium carbonate equivalent) over a 20 year period, subject to a 7% royalty. In September 2012, our Company formed a consortium consisting of Li3, POSCO, Daewoo International Corp, and Mitsui & Co. (the “Consortium”) for the purpose of participating in such CEOL auction. As required under the rules established by the Ministry of Mining, the Consortium submitted its bid for the CEOLs and in September 2012, the Company was informed that the Consortium’s bid was not the winning bid.

The Chilean government subsequently decided to invalidate the CEOL process due to an administrative error, as well as rescinding the CEOL Basis, which defined the regulations of the CEOL process. The Company submitted several appeals to the Chilean government requesting it to reconsider the invalidation and award the CEOL to the second highest bidder - the Consortium. The appeals have been rejected by the Chilean government.

More recently, in June 2014, Chile´s President and Minister of Mining signed a decree for the establishment of the National Lithium Commission, with the objective of recommending a new state policy for the exploitation of lithium and promotion and development of new projects in Chile. In January 2015, the National Lithium Commission issued its report and, as a result, the Chilean government is to consider working alongside companies from the private sector to develop the country's lithium reserves, increase production and secure the long-term sustainability of Chile's lithium industry. Since then, the Chilean government has continued to announce upcoming changes to the legislation in favor of advancing new lithium projects. We believe this is a positive step forward in the continued efforts of seeking a permit to exploit lithium from SLM Litio 1-6. Minera Li continues to seek a permit for SLM Litio 1-6, however, if no permit for lithium exploitation is acquired, the Maricunga JV plans to develop and exploit potassium from this property.

Summary of Permits Required for Maricunga Project:

In light of the above described regulation, the material permits currently required for the exploitation of lithium at the Maricunga Project include the following

For the SLM-Lithio 1-6 Concessions:

For the SLM-Lithio 1-6 Concessions and the Cocina, San Francisco, Despreciada, and Salamina Mining Concessions

Except where otherwise indicated, timeframes for obtaining the described permits are unknown.

Competition

We are a junior mineral resource exploration company that competes with other mineral resource exploration companies for financing, personnel and equipment and for the acquisition of mineral properties. Many of the mineral resource exploration companies with whom we compete have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties and on exploration and development. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and/or development. This competition could adversely impact on our ability to finance further exploration and to achieve the financing necessary for us to develop our mineral properties. Our competition includes companies such as Pure Energy Minerals and Lithium Americas.

Compliance with Government Regulation

We are committed to complying with and are, to our knowledge, in compliance with, all governmental and environmental regulations applicable to our company and our properties. Permits from a variety of regulatory authorities are required for many aspects of mine operation and reclamation. We cannot predict the extent to which these requirements will affect our company or our properties if we identify the existence of minerals in commercially exploitable quantities. In addition, future legislation and regulation could cause additional expense, capital expenditure, restrictions and delays in the exploration of our properties.

Employees

At June 30, 2016, we had two full-time employees, consisting of our Chief Executive Officer and Chief Financial Officer, and one contract employee. In addition, we have engaged several advisors and consultants.

We engage contractors from time to time to consult with us on specific corporate affairs or to perform specific tasks in connection with our exploration programs.

Subsidiaries

We currently have three wholly owned subsidiaries:

On October 22, 2014, the Company sold 60% of its shares in Noto Energy SA (“Noto”, an Argentinean corporation and a previously 100% owned subsidiary) to its CEO for proceeds of $4,245.

We currently retain 49% ownership of Minera Li (previously a 100% owned subsidiary), pending its dissolution pursuant to the terms of the Maricunga JV.

Intellectual Property

We do not own, either legally or beneficially, any patent or trademark nor any material intellectual license, and are not dependent on any such rights. We have trademarked Li3 Energy, its logo and registered the domain name www.li3energy.com. We consider many of our lithium mining site evaluation, exploration and development techniques to be proprietary, and periodically evaluate whether to seek protection for any such techniques.

Lithium and Lithium Mining

Lithium is the lightest metal in the periodic table of elements. It is a soft, silver white metal and belongs to the alkali group of elements, which includes sodium, potassium, rubidium, cesium and francium. The chemical symbol for lithium is “Li,” and its atomic number is 3. Like the other alkali metals, lithium has a single valence electron that is easily given up to form a cation (positively charged ion). Because of this, it is a good conductor of both heat and electricity and highly reactive, though it is the least reactive of the alkali metals. Lithium possesses a low coefficient of thermal expansion (which describes how the size of an object changes with a change in temperature) and the highest specific heat capacity (a measure of the heat, or thermal energy, required to increase the temperature of a given quantity of a substance by one unit of temperature) of any solid element.

These properties make lithium an excellent material for manufacturing batteries (lithium-ion batteries). According to the U.S. Geological Survey’s (“USGS”) Mineral Commodity Summaries 2016, issued in January 2016, global end-use markets were estimated as follows: batteries, 35%; ceramics and glass, 32%; lubricating greases, 9%; continuous casting mold flux powders, 5%; air treatment, 5%; polymer production, 4%; primary aluminum production, 1%; and other uses, 9%. Lithium consumption for batteries has increased significantly in recent years because rechargeable lithium batteries are used extensively in the growing market for portable electronic devices, and increasingly are used in electric tools, electric vehicles, and grid storage applications. Lithium is extracted from solutions called brines, which are associated with evaporate deposits, as well as from spodumene (a lithium aluminum silicate), which occurs in a rock called pegmatite.

Historically, especially during the period leading up to and during World War II, lithium was designated a strategic metal, heavily used in the aircraft industry because it is light and strong. During this period, the mineral spodumene (a lithium aluminum silicate) was mined by open pit hard rock mining methods and processed to recover the lithium. During the post-war period, lithium production from the higher cost hard rock mines was replaced by the lower cost extraction of lithium from the mineral rich brines associated with evaporite deposits. Evaporite deposits occur in environments characterized by arid conditions with extremely high evaporation rates. This environment typically occurs at high altitudes, greater than 3,000 meters above sea level, so evaporite deposits occur in only a very few locations in the world, including China (the province of Qinghai and the Autonomous Region of Tibet); the Puna Plateau, a high altitude plateau covering part of Argentina, Chile, Bolivia and the southern portion of Peru; and in a small region in Nevada, which is the core of what is called the Great Basin of the western United States.

Brine extraction (mining) and the recovery of lithium and other economic compounds is analogous to pumping water from an aquifer, but instead of fresh water, the water contains a variety of mineral salts in solution, including lithium, potassium (K), magnesium (Mg) and sodium (Na). This form of “mining” is much more efficient, cost effective and environmentally friendly than open pit mining. However, the processing cost of brine extraction can vary by a wide range, depending largely on:

Brine Exploration Phases

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

The Maricunga Project is currently in the feasibility phase, seeking to define the type, extent, location and value of deposits.

Key Stages of Lithium Recovery

Currently the most economical way to recover lithium from a salar (a dry lake or salt flat) is by solar evaporation. However, the process is subject to natural conditions, and the evaporation rate, relative humidity, wind velocity, temperature and brine composition have a tremendous influence on the solar pond requirements and in turn on pumping and settling rates to meet production quotas.

Each lithium recovery process has a unique design based on the concentrations of Li, Na, K, Mg, calcium (Ca) and SO4 in the brine, and, although there may be some similarities, each salar has its own customized methodology for optimum recovery due to the varying ionic concentrations. Wells are drilled, and the mineral rich brine is pumped to the surface into a series of large shallow ponds of increasing concentration. As water evaporates, the concentration of minerals in solution increases. Typically, the brine evaporates over an 18-24 month period until it has a sufficient concentration of lithium salts. At that point, the concentrate is shipped by truck or pipelined to processing plants where it is converted to usable salt products. In the plant, sodium carbonate (soda ash) is added to precipitate lithium carbonate, which is dried and shipped to end users to be further processed into pure lithium metal. The by-products such as potassium chloride (potash), sodium borate (borax) and other salts may also be recovered and sold to end users.

The primary reagents used to produce lithium from brine are lime and soda ash. Both substances are natural materials, commonly used in many processes and have no detrimental environmental effect when used properly. Other than solar energy, only minor amounts of fuels are consumed in the production process (pumping the brines into the ponds, etc.).

Global Market

The USGS’s Mineral Commodity Summaries 2016, states that worldwide lithium production increased slightly in 2015 in response to increased lithium demand for battery applications. According to the report, production from Argentina increased by approximately 17% and production in Australia and Chile increased slightly. Major lithium producers expected worldwide consumption of lithium in 2015 to be approximately 32,500 tons, an increase of 5% from that of 2014. Due to increased worldwide demand, spot lithium carbonate prices increased by approximately 10 to 15% compared to 2014.

Subsurface brines have become the leading raw material for lithium carbonate production worldwide because of lower production costs compared with the mining and processing costs for hard-rock ores. Owing to growing lithium demand from China in the past several years, however, mineral-sourced lithium regained market share and was estimated to account for one-half of the world’s lithium supply in 2015. Two brine operations in Chile and a spodumene operation in Australia accounted for the majority of world production. Argentina produced lithium carbonate and lithium chloride from brines. China produced lithium carbonate, lithium chloride, and lithium hydroxide mainly from imported spodumene, but also from domestic brines and minerals. A new brine operation in Argentina began commercial production in 2015.

Lithium supply security has become a top priority for technology companies in the United States and Asia. Strategic alliances and joint ventures between technology companies and exploration companies have been, and are continuing to be, established to ensure a reliable, diversified supply of lithium for battery suppliers and vehicle manufacturers. Brine operations were under development in Argentina, Bolivia, Chile, and the United States; spodumene mining operations were under development in Australia, Canada, China, and Finland; a jadarite mining operation was under development in Serbia; and a lithium clay-mining operation was under development in Mexico. Additional exploration for lithium continued, with numerous claims having been leased or staked worldwide.

Rechargeable batteries were the largest potential growth area for lithium compounds. Demand for rechargeable lithium batteries exceeds that of other rechargeable batteries. Automobile companies were developing lithium batteries for electric and hybrid electric vehicles. A leading electric car manufacturer was constructing a lithium-ion battery plant in Nevada capable of producing up to 500,000 lithium-ion vehicle batteries per year. The plant was expected to be vertically integrated, capable of producing finished battery packs directly from raw materials by 2020.

The USGS’s Mineral Commodity Summaries 2016 gives the following estimated world lithium mine production (in metric tons of lithium content):

Substitution for lithium compounds is possible in batteries, ceramics, greases, and manufactured glass. Examples are calcium, magnesium, mercury, and zinc as anode material in primary batteries; calcium and aluminum soaps as substitutes for stearates in greases; and sodic and potassic fluxes in ceramics and glass manufacture. Substitutes for aluminum-lithium alloys in structural materials are composite materials consisting of boron, glass, or polymer fibers in resins.

Demand for Lithium

According to the August 2016 signumBOX Performance Index, lithium demand is expected to increase at a base rate of 7% over the next 19 years. The increase in the growth rate is due primarily to an increase in demand from the battery industry.

Additional Information

The Company files annual, quarterly and current reports, proxy statements and other information with the SEC. The public may inspect or copy these materials at the Public Reference Room at the SEC at 100 F Street, N.E., Washington, D.C. 20549, and can obtain information of the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. Our public filings are also available from the SEC’s website at www.sec.gov .