Mexican Geothermal Lithium Project || Pan American Lithium

On December 18, 2009, Pan American Lithium Corp. acquired an option, from Escondidas Internacional S.A. de C.V., a privately-held Mexican corporation, to acquire an indirect interest in the Cerro Prieto geothermal brine project in Baja California Norte, Mexico. The option is to acquire 76% of the issued and outstanding shares of Escondidas. On March 29, 2010, and June 30, 2010, the parties amended the original option agreement. The effect of the amendments was to extend the closing date to October 31, 2010, and reduce the consideration payable by the Company under the Agreement

The primary asset of Escondidas is a joint venture and development agreement with CPI Internacional S.A. de C.V., a privately-held Mexican corporation, whereby CPI and Escondidas agreed to jointly process lithium and precious metals in the Cerro Prieto geothermal brine concessions that are owned by CPI and located in Baja California, Mexico

In consideration for the option, Pan American Lithium agreed to pay or issue the following on the closing date of the Option Agreement on a pro rata basis: (1) US$125,000 to the shareholders; (2) issuance of 5,000,000 common shares to the shareholders; and (3) issuance of 5,000,000 warrants to the shareholders, each warrant of which entitles the shareholder to acquire an additional share of the Company at the exercise price of US$0.50 per share for a period of two years from the closing date

In addition, Pan American is obligated to pay to the shareholders the following amounts on a pro rata basis: (1) US$500,000 - 6 months from the date of commencement of commercial production; (2) US$500,000 - 12 months from the date of commencement of commercial production; and (3) US$750,000 - 18 months from the date of commencement of commercial production

The Option Agreement further provides that the Company will pay: (1) US$150,000 to Escondidas on signing for the repayment of outstanding indebtedness owed by Escondidas;(2) US$50,000 to Escondidas on signing, and US$8,000 on a monthly basis thereafter until the earlier of the closing date or the termination of the Option Agreement to cover costs relating to outstanding expenses, due diligence, legal fees and other general and administrative expenses of Escondidas; and (3) US$50,000 to Escondidas at closing for the repayment of outstanding indebtedness owed by Escondidas

The Company is currently conducting its due diligence review in connection with the Escondidas transaction. The Company anticipates it will incur a significant amount of time and costs in connection with the due diligence and closing of the Escondidas transaction. If additional funds are required to close the transaction, the Company anticipates that it will raise such funds through an equity financing on a private placement basis

The geothermal plant, powered by steam brines, is drawn from 170 geothermal wells tapping rocks that were volcano feeder system. Avg. static brine flow is 5.7 M Gal/day

Fresh brines funnel through 6 square miles of existing sequential evaporation ponds concentrating metals values to some 11.7X original salt content

On average, 40% steam channelled to generating plants and 60% brine by-product sent to evaporation ponds

Option to commercially exploit residual by-product, mineral-rich brine, from world’s second largest geothermal power plant

Project enhanced due to substantial existing infrastructure: geothermal plant, well fields, evaporation ponds and related facilities